The all-but-confirmed launch of Apple’s streaming music service in June has some competitors exploring alternative sources of revenue. According to the Wall Street Journal, Spotify, one of the largest and most prominent music streaming services on the block, is laying the groundwork for its own Web video business.
As one might assume, the plan to jump into video isn’t exactly spur-of-the-moment — Spotify has apparently been in discussions with well-known digital content producers about potential partnerships, including traditional outlets and companies that specialize in making videos for YouTube, for quite some time. So far, the company discussed acquiring and co-creating original series for a platform it could unveil as early as May 20 — which also happens to be the date of Spotify’s recently-announced press event in New York City.
Like YouTube, a majority of the profits generated by Spotify’s new venture will come from ads. Sources tell the Journal that Spotify’s video service will be open to non-subscribers, and will eventually incorporate some form (or forms) of display advertising. The report didn’t elaborate whether paying subscribers will be subjected to the same, but it’s not difficult to picture a Spotify ad-free video tier at a slightly higher price.
Data is Spotify’s other big piece of the video puzzle, apparently. The specifics are still being ironed out, but the company’s hoping to parse users’ music-listening habits to produce video content that appeals to a variety of user profiles — a fan of Kenny G wouldn’t see the same videos as a Green Day devotee, for example.
Why video? Despite 45 million ad-supported users, 15 million paying subscribers, and a substantial jump in revenue this past quarter, Spotify has yet to turn a profit after expenses. And the service faces growing competition from new players like Jay-Z’s Tidal and Apple’s new service, as well as stalwarts like Pandora, Deezer, Rdio, and others. While the service has tried to stem the tide with incredibly cheap promotional pricing and music exclusives, expansion may be key to survival.
But if Spotify thinks the video market is its ace in the hole, the service may be in for a shock. Startups have tried and failed for years to upend the juggernaut YouTube, which has dominated web video for nearly a decade. According to Statista, as of February YouTube held a market share in the US of a whopping 73 percent of overall “visits,” dwarfing the competition by a massive margin.
And history is full of tech giants who’ve failed to leverage massive user bases to enter new markets. Apple killed Ping, its attempt at a social network, after just two years. Google’s Buzz, a cross between Facebook and Twitter, lasted less than half as long. Spotify obviously thinks it can do better, but its chances, quite frankly, aren’t great. We’ll have to wait and see what Spotify brings to the table later this month to find out just what the company has in store.
