Analyst firm Informa teamed up with streaming music service Spotify to issues a report stating the obvious: if operators offer their customers a streaming music service instead of trying to build their own store then they stand to make money hand over fist. Spotify, for those of you unaware of the most brilliant music service since Napster, is like iTunes, but instead of all the music living on your hard drive, it’s on a server in Sweden. Click a song and it just starts playing. Want to share music? Just make a playlist, copy the playlist URL, and send it to your friend who is also using Spotify and they can no enjoy your mid-90s dance collection. The business model is simple. People who don’t pay get ads every 20 to 30 minutes and they can only listen to 20 hours of music. People who pay, and it’s only 10 EUR per month, get higher audio quality, no ads, and they can use the Spotify application on their Android, Symbian or iOS device.
Assuming an operator with 20 million customers offers those users a third party streaming music solution, then they’ll rake in an additional 77.7 million EUR in 2011. “Music download stores which operators launched prolifically over the last 5 years are commodities and had little impact on core business metrics. Streaming services, by contrast, have proved an effective way to differentiate from the competition and win new customers. They have also been used to upsell high-ARPU devices and reduce churn. Over half of Spotify / Telia customers said they were more likely to stick with Telia as a result of the Spotify partnership,” said Adrian Blair, Director of European Business Development at Spotify.
There’s a reason Spotify hasn’t launched in America yet, and that’s Apple. They want to do the same thing Spotify is doing, plus they’ve got record executives in their front pocket since they single handedly saved the music industry from the explosion of online piracy that took place in the early and mid parts of the last decade.