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Business News Digital
Spotify considering premium-before-freemium windowing
By Chris Cooke | Published on Wednesday 9 December 2015
Spotify could be close to allowing at least some artists to ‘window’ their releases on the platform, so that premium users would gain access to new material ahead of those using the free version of the streaming service.
According to the Wall Street Journal, Spotify execs have indicated to labels that they are now considering adopting such a windowing approach for some artists, though it isn’t yet certain how that might work, and the company would likely look to test the system with one or two artists before introducing any permanent change of policy.
The current rule with Spotify, of course, is that your music is either available to both paying and freemium users, or it’s not available at all. The streaming service’s attitude is that it’s freemium that sells premium, and therefore it needs a really compelling free-to-access level to hook-in new users, who can then be up-sold the £10 a month package with the promise of no ads and more mobile functionality.
In the main it’s a strategy that has worked, in that Spotify has generally signed up paying users faster than its competitors whenever it has entered a new market. And Spotify’s premium users are in no small part behind the boom in subscription revenues in the last two years, which have helped keep the record industry’s revenues more or less static, even as CD and download sales decline.
However, freemium pays much, much smaller royalties into the music industry, especially as Spotify has never really got its ad-selling business off the ground in any serious way, while some artists just don’t like the idea of consumers getting fully on-demand access to their music – especially their new music – without paying a penny.
It’s no secret that some major labels and some big name artists have been putting the pressure on Spotify over its freemium service in the last year. Taylor Swift, of course, pulled from Spotify entirely on this point, while some labels have been asking Spotify to limit its free offer in some way, maybe by offering less functionality – many liked the Rdio approach of only offering personalised radio to freemium subscribers – or less content.
Which brings us to the windowing approach. Coldplay’s new album wasn’t on Spotify last week when it was released on CD, download and premium-only streaming services, but it will arrive there on Friday. Had Spotify offered the flexibility to window premium-before-freemium, then its paying users – who are among the record industry’s best customers – could have had the new record on release, with only the freebie brigade deprived Chris Martin’s latest warblings for a whole week.
Given Spotify, as much as anyone, needs to shift as many people as possible from freemium to premium (it takes a big hit on free users too), you might think that it would like the idea of premium-before-freemium windowing: “upgrade now to hear the new Coldplay album” being a simple sell. And presumably Spotify recognises that giving in to the record industry on this particular freemium gripe has an upside.
Though there will be issues, not least which artists are offered the windowing option, and how big is the window? For Spotify, really it needs to be just premiere league artists who go the windowing route, but who’s to say who is in the premiere league?
Then, of course, there are YouTube and SoundCloud. If Spotify lets artists window their new music, but then the new records are available to stream on the ‘opt-out’ free-to-access streaming platforms, Spotify Free becomes less compelling, and the streaming company loses its up-sell audience.
Spotify needs labels to commit to aggressive Content ID management and takedown issuing to overcome this issue. But then, when they put their mind to it, the labels have got quite good at keeping new releases off YouTube and SoundCloud, so that is probably do-able.
Even so, Spotify remains non-committal on all this, except to say that it is still committed to its basic commitment to having a committed freemium offer. Though it is thought windowing was considered for the Coldplay release – and, of course, there was that Muse premium-only track as part of a PlayStation promotion earlier this year – and we may well see some real testing in this domain in 2016.
A cynic might say that Spotify conceding on this point in special circumstances (ie for top artists) is a useful way of placating the labels with freemium concerns, without actually really conceding much at all. Though we don’t know any cynics here at CMU, so can’t comment on that one way or another. All that is certain is that the role of free streaming will continue to be a big talking point in music circles next year.
