Spotify, the digital music service that is conquering the world, is growing fast especially since its launch on the Asian market in 2013, along with rapid expansion of Internet streaming. Just as it has contributed to revolutionising the music industry the Swedish tech start-up’s vision of building a universal jukebox is gradually coming true (present in 60 countries as of December 2016).
It has been around long enough (established in Sweden in 2006), basically since the pre-smartphone era – which is in itself telling for how fast-paced the digitalisation of the world is today.
Founder Daniel Ek back in 2008 (quoted in a IDG News Service story) talked of – Spotify being able for Windows XP, Vista and Mac OS X – how “support for mobile is also in the planning stages, it would be interesting to see what would happen if Spotify tried to offer support for the iPhone, but I think I already know the answer.”
And in late 2008 Spotify’s innovation was threatened by competition from Apple, Nokia and Sony Ericsson, with its PlayNow.
World of music already changed
Fast forward to 2016 and the relatively long journey has really taken off, having, along with strongly increasing music streaming, reached 100 million users worldwide by September. Meanwhile, there is also serious competition on this market today from Amazon Music Unlimited, Apple Music etc. and music streaming mobile apps such as 8tracks, Shazam and Joox.
A big chunk of the growth is already taking place in Asia, where most recently Spotify Indonesia was launched in March 2016, followed by Japan in late September.
“We have seen quicker growth in the last six months than before. When we announced our 40 million subscribers we looked back on when we launched, and it took us six years to get to our first ten million subscribers, then a year to get the next ten and the last ten came on board in the last six months. So the acceleration of music streaming adoption is here, it’s not the future, it’s the now!” says Sunita Kaur, Managing Director Spotify Asia.
Also, that Apple Music launched in June 2015, raising the bar for all players, just enhances Sunita’s statement.
“The world of music is not changing – it has already changed.”
The fact that highly reputable Apple gets involved in music streaming she thinks speaks volumes that you know you’re doing something amazing.
The future for music streaming seems bright as the numbers are pointing in the right direction. For the global music market 2015 digital overtook physical with 45%, Streaming revenues increased 45.2%, while download revenues declined 10.5%.
As for the music industry Spotify has up to now returned USD 5 billion.
“In the first six years, 3 billion dollars, in the last two years an additional two billion dollars. The more people use Spotify it’s just going to keep on growing. This is money that would have been lost to piracy,” says Sunita.
Sunita herself, having worked in Asia for the past 21 years, was intrigued by the digital disruption, long before it became the buzzword it is in 2016.
“Back in 2005 it dawned on me that if I did not move myself into the digital sphere I would most certainly become obsolete within ten years.”
She had up to then worked for Time Warner and SPH’s magazine division. Ready to take on the digital world, she found herself an online position with Forbes.com to build up their Asia Pacific and Middle Eastern operations.
“I also fell in love with start-ups, which saw me move from Microsoft at end of 2009 to help Facebook build their AP operations. I was one of the early people at Facebook here. And when Spotify started to build their operation in 2013, it was the perfect move to start to work with another amazing start-up again.”
Sunita has been with Spotify since April 2013 and has seen how the product has evolved.
“And I’ve seen how music streaming has evolved, which is probably the most exciting thing to actually work on and grow with. We arrived quite early when music streaming was in its infancy stage. So, there has been a lot of focus on the whole education around music streaming and anti-piracy, especially in a place like Asia.”
Bring back the heydays
Spotify’s “benchmarking” from the very beginning was internet piracy, the epidemic illegal downloading of music which had practically killed the CD sales market by 2005.
“It was our mission from day one and it’s still our biggest competitor. It needs to be, we always say we want to bring back the music heydays of the CD, prior to piracy,” comments the Spotify MD.
The other dimension is that today there are a number of streaming opportunities on the market.
“The fact that there are more music streaming companies or choices in the world now than ever before is a fantastic thing, because it goes back to education, to piracy: the more players in the market, the more education goes out. So, if you dial the whole industry back 50 years you have cassettes, vinyl, and then music started to get digitised with CDs, which gave birth to piracy.”
Before Spotify enters a new country they always look at the percentage of piracy and in both the Philippines and Indonesia over 90 per cent of the music being consumed in those countries were being listened to illegally. It is then that a number of streaming providers can make a difference.
“When you’ve got more and more companies going into places like Indonesia, offering music streaming people start wondering: ‘O.K. what’s this new option about?’ The beauty of Spotify is it’s really easy to tell someone not to pirate music, but it’s much easier when you give them an option. So our narrative, in Indonesia and all over the world: Don’t sit and download one song at a time when you have here in your phone, one click away, 30 million songs. It’s safe, legal, and quick. And you have a choice of enjoying it for free or you can become a subscriber. That is a very powerful message and that’s the power of Spotify – the choice.”
In a new market, fans generally keep asking ‘When are you coming?’ explains Sunita.
“That’s a great indication, the thirst for Spotify in a country like Indonesia. The fact we started off building up in Asia in 2013, having already launched in Singapore, Hong Kong, Taiwan, Malaysia, and the Philippines – the rest of SEA and Asia will keep asking for Spotify.”
“In Indonesia their theme was ‘Waktunya Indonesia’, which means: ‘Finally you have arrived to Indonesia’. It was exciting, going into a market where there was already brand love with people waiting.”
One thing that Sunita is especially proud of in running the Asia division is how they have found the right balance in mixing the global direction and product alongside localisation.
“Music has no borders, and we haven’t needed to change the product too much because no matter where you live in the world people use the same product the same way. Localisation came in with language, music catalogues and payment options as we started rolling out across diverse Asian markets.”
“Our buzzwords are ‘localised’ and ‘customised’, and we keep them in mind as we are going into a new market, from language to music, to payments, to all the other good stuff that constitutes the power of Spotify. We find around six months after we are allowed in a market that we have enough data for further personalisation. Then Spotify can introduce Discover Weekly and Release Radar, which are playlists customised just for you.”
“We are so proud of one of our newest markets Indonesia, as it was the one that we localised the quickest and most efficiently from day one. First, the entire app was translated into Bahasa Indonesia, so you had a choice of which language. We also tailored payment options: you can subscribe by credit card but also via bank transfers and we have partnerships where you can subscribe by cash. And last but definitely not least we launched with localised playlists, with very local music genre.”
“Especially in Indonesia and Philippines where the local music scene is so robust, it is incredibly important that we have local music on Spotify there. And we’re thinking the exact same way for all other markets that are not live yet. So there is a lot of due diligence that goes into a market before it goes live. We would rather wait a while and launch the perfect product than to rush into a market. Patience is a fantastic strategy!”
Spotify works with local rights holder to ensure they can get as much local music as possible before going live.
“We could turn on all the markets with just international catalogues but we would rather build a version of Spotify for each local market that has all of the music that everybody loves. Each country has amazing indie labels that really represent the local talent – and that’s something we’re very passionate about.”
“Then you’ve got publishing houses, collection societies and aggregators, so there are a lot of players in the music industry. And in every country we go into there’s a conversation with everyone.”
So far Spotify have licensing agreements with over 300 000 rights holders.
Sunita says that they are simultaneously working on all markets Spotify is not available.
“When it comes to going live in a market, our first and very most important start is the music. And depending on how negotiations go we will decide which will be the next market to go live in and we tend not to talk about a roadmap until the day we go live.”
The localisation also includes pricing models that differ across the world, where a lot of research goes into finding the right price that would appeal to as many people as possible.
Intelligence for discovery
The development of this start-up since its inception is very much based on how the users consume music, where Spotify has bought some, to quote Sunita, “amazing companies” to improve the product’s music intelligence.
“We always say we are a music company in our hearts but we are a tech and data company in our heads. Spotify is a beautiful combination of all those things,” says Sunita.
A telling example is the way the intelligence helps the user to discover the music that is more in line with one’s taste.
“Every song is tagged, so the more you listen to on Spotify the better the music recommendations will be that we will make to you because we are gradually understanding better and better what kind of music you’re listening to.”
So, every Monday each user gets a completely customised two-hour playlist based on their listening habits and who they are following on Spotify. And that grows together with what they’re listening to.
“The real light bulb that went off across our heads that really impacted our business was how people look for music. This happened a couple of years ago when we started seeing that the way we were all looking for music, and even making playlists were by moments such as: ‘running’, ‘cooking’ or ‘songs I sing to in the shower’… the lists went on and on.”
“This goes back to the tech world we live in today; gone are the days of building products inside the companies and releasing them to the world. What tech companies do now is to really spend time and look at the trends; how people are using our products, how people are using Spotify. And we take that and make it better and easier.”
Spotify also points out that music is inherently social, that it is meant to be shared. And in the digital world a lot of music that one could not previously get hold of (released in 500 copies on 12” vinyl or simply sold out) is increasingly being re-released digitally. This forms a goldmine for rediscovering all but forgotten music, and for long unavailable music not least within the underground dance scene.
Sunita comments that this is spot on how Spotify fulfils an important role for spreading and sharing music.
“All the music from the 50s and the 60s and the 70s, how is our generation going to keep it alive because we can’t go out and buy their CDs anymore!? And this is something my husband and I do quite a lot; like sharing the sounds of our generation with our nephews and nieces. This is a story that gets told a lot around dinner tables; keeping music alive. I remember growing up with up and falling in love with Elvis Presley because of my mom. She would keep her generation of music alive.”