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Does Spotify Have A Future?

Spotify has announced an update with features that make it easier to discover new music and track what your friends and random famous people are listening to. Will that be enough to persuade more people to actually spend money on the service — and will artists ever get paid fairly?

Main picture by Spencer Platt/Getty Images

The new features in Spotify cluster around two new tabs: Follow and Discover. The Follow tab lets you see what music others are listening to, and also track what your favourite artists are up to. Being able to get notifications when new material is released is definitely a boon.

The Discover tab highlights new music based on your existing playlists, and constantly updates depending on what you’re listening to. You can also save music into a “collection” without having to assign it to a specific playlist, and check samples of new music without interrupting your current playlist. The new features will roll out into the desktop Spotify app over the next few weeks, and will hit the mobile app next year.

Spotify made a big deal of the announcement, hiring musicians for major launch events around the world. The US launch included a stupidly awkward conversation between former adversaries Sean Parker (ex-Napster, now on the Spotify board) and Lars Ulrich from Metallica, which has just licensed its music to Spotify. In Australia, video of the US launch was shown on a delayed stream, interspersed with live performances by Ricki-Lee and Paul Dempsey from Something For Kate. Both did an impressive job, especially given the early hour and the need to impress a room full of sleepy journalists. But when the music was over, I was left wondering about quite a few things.

Who’s Using It?

Spotify launched in Australia back in May. Its brand is arguably the most visible amongst streaming subscription services, but it has plenty of local competitors. Its biggest advantage over most of them is that it offers a free ad-supported service, though you have to pay if you want mobile device access. But what does that mean in terms of user numbers?

Spotify won’t disclose Australian subscriber numbers, but says that Australia and New Zealand was its most successful country launch ever. To put that in perspective: in the US, Spotify has 1 million subscribers, which represents just 0.3 per cent of the American population. If Spotify Australia was twice as successful, that would mean 150,000-odd people had subscriptions. That’s a very generous estimate, since “launch success” doesn’t necessarily mean signed-up paying subscribers. But even so, it’s roughly the same number of people who purchased Karise Eden’s debut album. There’s a long way to go before it’s the dominant means of listening to music, and no clear data on whether the associated advertising revenue will create a sustainable long-term business.

Are Artists Rorted?

One frequent criticism of Spotify is that artists don’t money from it. At the launch, CEO and founder Daniel EK boasted that the company pays back nearly 70 per cent of its income to “rights holders”, but that leaves a lot of unanswered questions. The rights holders are often the record labels, some of which have contracts with artists that don’t require them to share streaming revenues. Even if the artist does get that money, that doesn’t mean it’s a large payment.

One local performer told me that Spotify pays around $5 for 10,000 streams. Even after taking out a healthy share for a record label and a digital music provider’s 30 per cent tranche, you’d make the same amount of money from just 10 downloads. If every performer on Spotify is relying on that level of payment, it’s going to get ugly very quickly.

Sure, you can argue that some money is better than the zero dollars you get from pirated music, and that promotion via Spotify can ultimately lead to sales of downloads or CDs or concert tickets. Making a living from music is not easy, and there’s no guarantee of fairness if you pursue that path. But I can’t see that Spotify is actually helping that much; it’s just another symptom of the fractured entertainment industry business model. And I can’t help suspecting Ricki-Lee will make more from one corporate Spotify breakfast gig than from thousands of listeners on the service.

The Future Is Unclear

Spotify founder and CEO Daniel Ek is confident that subscription streaming is the future. “There are people that are growing up to streaming music services,” he said. “That’s the only music they are ever going to see.” Picture by Spencer Platt/Getty Images

I think the only thing that’s certain about media consumption is that it will change frequently. Ten years ago, you could have made a similar comment about iPods. They haven’t disappeared, but no-one thinks standalone MP3 players are the future anymore. Spotify certainly has a dominant position in the current environment, but adding social features doesn’t guarantee that status for all time. Even in the streaming space, it could get blindsided by a resurgent MySpace, or if Apple decides to move into streaming. As someone who made his money before Spotify existed once said: the times, they are a-changing.

Lifehacker’s weekly Streaming column looks at how technology is keeping us entertained.