CNET ran an article on Spotify and its troubles of setting up business in the US. Many believe it’s the stubbornness of the record companies that have slowed them down to a halt almost. However, the CNET article states that Apple maybe protecting its iTunes Store from Spotify and talking with record labels to think twice about the ad-supported model. According to the CNet article, Apple executives are worried about the effects of a free music service might have on the rest of the market.
Apple and Amazon’s businesses were given as examples of companies that would suffer if someone would come to the market place with a free alternative. I agree they might suffer, but Apple and Amazon are beginning to sound like the cable channel directors when VCR came out. This essentially means that Apple, Amazon and others alike must innovate to keep up the top spot – that’s just how things go.
Spotify has proven to be hugely successful in the countries where it currently operates in. In 2009, Spotify’s revenues surpassed 90 million Swedish kronor (9.7 million euros) and ended up with a profit of about 14 million kronor (1.5 million euros). This turns out to about a 15,5% profit margin. Now while these numbers aren’t in the tens of millions euros they could be, they tell a very clear story to me – the business is scalable and very clearly working.
Some sources also tell that Apple is working on a Spofity-kind of service to defend their position in the music business. Music is one of the most universal things out there and if Spotify would show high adoption rates (and we know it would) in the US market, it could overtake Apple in the blink of an eye. That’s definitely something to be scared of.
Spotify, to my belief is only beginning its crusade in the the music industry. Their service is by far the best in the user experience, but it still comes short in many ways what it could be. Definitely a lot of room for improvement, but with its current offering – it’s already showing how things should be done.