Spotify forges marketing partnership with Coca-Cola

Spotify is hoping that Coke will teach the world to click its play button.

The Swedish digital music service on Wednesday announced a broad-ranging marketing deal with Coca-Cola Co. that could help turbocharge the number of people who are exposed to, and ultimately sign up for, Spotify.

Although the partnership does not involve any money changing hands, both parties describe it as invaluable to their efforts to market their products.

For Spotify, the burgeoning music-streaming service that launched in the United States in July, getting access to Coca-Cola's formidable global marketing engine will come in handy as it expands its international footprint.

Spotify operates in 13 countries, mostly in Europe, but has said it plans to launch its service in additional markets. Future launches could, for example, be promoted via Coca-Cola's beverage containers or advertising campaigns, said Jeff Levick, Spotify's chief marketing solutions officer.

In return, Coca-Cola can now use Spotify's service to instantly add music to its online marketing repertoire. For instance, the drink giant can add songs to its Facebook page via Spotify without having to negotiate licenses for each tune. (Spotify already has financial agreements with major record labels to pay royalties for every song that is played on its digital service.)

“The fact that they’re partners with labels was important to us,” said Emmanuel Seuge, head of global sports and entertainment marketing for Coca-Cola. “But first and foremost, we just fell in love with the service.”

Spotify has 10 million people who use the service at least once a month. Of those, 7 million plug into the free version of Spotify, which is partially supported by ads and is available only through a computer browser. The remaining 3 million or so people pay a monthly fee for a premium, ad-free version of the service that's also available on tablets and smartphones.

Coca-Cola has been one of Spotify's largest advertisers, and Wednesday's announcement does not call for any changes in that arrangement.

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Photo: From left, Joe Belliotti, Director Global Music Marketing, The Coca-Cola Co.; Emmanuel Seuge, Coca-Cola's Head of Global Sports & Entertainment Marketing; Daniel Ek, chief executive of Spotify; and Jeff Levick, Chief Marketing Solutions Officer of Spotify. Credit: Coca-Cola and Spotify.

Spotify's Daniel Ek and the music 'dinosaurs'

Less than seven months after launching his digital music service in the U.S., Spotify's Daniel Ek found himself rubbing elbows with the upper echelon of the record industry executives who have descended on Los Angeles for this Sunday’s Grammy Awards.

The 28-year-old Swedish entrepreneur with a boyish face that still hints of baby fat on Friday afternoon addressed a ballroom full of power attorneys in Brooks Brothers and Armani suits — essentially schooling them on the brave new world of digital music.

Ek, pictured above on the right, boldly predicted that revenue from streaming services such as Spotify will in two years return as much revenue to the industry as iTunes does today. Since launching its service in 2008, the Stockholm-based company has remunerated more than $200 million, roughly 70% of its revenue, to labels and publishers.

“The value of music is not $15 billion,” an estimate of annual music sales, Ek told an audience of several hundred at the Grammy Foundation’s Entertainment Law Initiative luncheon as they dined on endive dressed in raspberry vinaigrette. “It’s worth much, much more than that.”

Spotify’s service has caught on worldwide with more than 10 million listeners who tune in at least once a month — 3 million of whom pay around $5 to $15 a month to access premium versions.

Though music labels have embraced Spotify's unusual approach — of offering a generous free version that gives users online access to millions of tracks on demand — the company continues to face skepticism from some bands and musicians who fear that streaming music services eat into album sales.

Bands such as Coldplay and the Black Keys, and performers like Mac Miller, have opted to withhold their new albums from streaming services such as Spotify — at least for the first few weeks after the albums’ releases. (This week some of former Beatle Paul McCartney's songs also became unavailable on Spotify, an apparent result of contractual requirements not related specifically to the streaming service.) Ek emphatically disagreed with those decisions.

“There is no cannibalization,” Ek said before a packed audience in the Crystal Ballroom of the Beverly Hills Hotel. “At the end of the day, I want the music industry to be larger than what it is today. And I believe that the two models [streaming and sales] can co-exist side by side."

As if to punctuate a contrast with Ek's youthful approach, John Branca, veteran counselor to the stars, followed him on stage with the following remark that drew chuckles from the crowd: 

"It’s a popular belief that the music industry is over, that it’s seen better days. Some would say that we lawyers are the dinosaurs of the legal landscape, that paleontology is a better subject for us and that a better forum for this would be the La Brea Tar Pits."

As a prominent music attorney, Branca's clients have included the Beach Boys, the Doors, the Rolling Stones and Carlos Santana. He is also the executor of the Michael Jackson estate.

Branca summed up the challenge for the music industry, pointing out that many of music's greatest stars created their music "before the digital age."

"How do we present these great artists to a new generation of fans?" Branca said. 

One could almost hear Ek replying, "Through Spotify."

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— Alex Pham

Photo: Spotify Chief Executive Daniel Ek, right, speaking with music attorney John Branca, center, and Josh Tyrangiel, editor of Bloomberg Newsweek, before the Grammy Foundation's Entertainment Law Initiative luncheon in Beverly Hills. Credit: Alex Pham / Los Angeles Times.

Cricket is chirping half a million music subscribers

Cricket, the San Diego-based cellphone company operated by Leap Wireless International Inc., announced Sunday that its Muve Music service has exceeded half a million subscribers, making it one of the largest premium digital music services in the U.S.

Granted, Muve Music is not exactly the same as Spotify, Rhapsody, Slacker or any other number of premium on-demand digital music services out there. The most obvious difference is that Cricket's Muve is part of its cellular phone service rather than a distinct music offering.

For $55 to $65 a month, depending on the type of phone, customers get unlimited talk, text and Internet data, as well as all the song downloads they can cram into their phones (up to 3,000 tunes at a time, depending on the device's memory). The music service is "baked" into Cricket's monthly cellphone bill. For about $10 less a month, customers can opt for service plans that don't include Muve Music.

Cricket introduced Muve a year ago in one test city, Las Vegas, coinciding with the Consumer Electronics Show in January. Four months later, Muve was rolled out to areas in which Cricket offered its phone service. That covered about one-third of the U.S. at the time. Then, in September, Cricket expanded its cellular service, including Muve Music, nationwide.

Since the fall, subscribers who have sprung for cell plans that include Muve Music have zoomed from 200,000 to more than 500,000 at the end of December. Much of the surge came in the last two weeks of last month, when many activated service on phones they received as gifts over the holidays, said Jeff Toig, Cricket's senior vice president.

That puts Cricket roughly neck-and-neck with Spotify, whose July debut in the U.S. market was greeted with a cacophony of press coverage. Spotify, which has more than 2 million paying customers out of 10 million active listeners worldwide, has not released its U.S. subscriber data. But sources familiar with the figures say Spotify and Cricket are a hair's breadth away from each other.

The largest player in the field, Rhapsody, has about 1 million paying customers.

"We’re really pleased at how the business has accelerated and how much the concept has resonated with our customers," said Toig, who added that Muve users have downloaded more than 500 million songs in less than a year, amounting to about 300 songs per customer.

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-- Alex Pham

Photo: Cricket's Muve Music service on a Samsung Vitality smart phone. Credit: Dan Hontz Photography. 

Spotify invites other Web and media companies to come play

Hoping to attract more users and keep them enthralled with its digital music service, Spotify has partnered with other Web and media companies such as Rolling Stone magazine, Songkick and TuneWiki to juice up its service with articles, reviews, recommendations, lyrics and other content.

Rolling Stone, for example, will integrate its year-end magazine issue with Spotify's service so readers can instantly play most, if not all, of the songs featured in the articles. The integration will involve the magazine’s future issues as well.

“People used to take that issue with them to Amoeba Records to buy the albums,” said Bill Crandall, head of digital content for Rolling Stone during Spotify’s packed news conference in New York on Wednesday to announce its new partnerships. “Now we can instantly get that music to people through Spotify with a click.”

Spotify, which lets users stream music online and on mobile devices, is seeking more than just editorial content to accompany the 15 million songs it has available to listeners. In the coming weeks, it will begin rolling out a variety of music-related applications. One will allow users to purchase concert tickets for the band they’re listening to via Songkick, which lists upcoming concerts by location.

“The average American goes to fewer than two concerts a year,” said Songkick Chief Executive Ian Hogarth. “This will help us get people out to see more live music by letting us tap into the 10 million people who are actively listening to music on Spotify.”

An application from TuneWiki, a site that offers lyrics, will allow listeners to sync them up as songs are streamed on Spotify. Moodagent, a service that makes music recommendations, would generate playlists.

“Spotify wants to keep you engaged in their service for as long as humanly possible,” said P.J. McNealy, an analyst with Digital World Research.

Spotify, a Swedish company that has gained more than 2 million users in the U.S. since launching here in July, is looking to boost that figure by making the service easier to dive into, as well as keep hard-core music fans engaged by giving them more ways to unearth new and obscure songs, said Ted Cohen, president of digital media consulting firm TAG Strategic.

Getting additional visitors is critical to Spotify’s business, which relies on hooking people with its free service and persuading some to spring for its premium options. Those include a $4.99-a-month plan for an advertising-free service and a $9.99 monthly package that streams music to mobile devices.

Ken Parks, the head of Spotify’s U.S. operations, said enlisting outside developers lets the company introduce new features to its service without having to create them in-house.

“Some of our users want an editorial voice,” Parks said. “We don’t do that. But Rolling Stone does. Our users want an easier way to build playlists. Moodagent does that better than we can ourselves. At the same time, we bring value to our partners by providing them with the music to go with their services.”

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Photo: Daniel Ek, chief executive of Spotify, announcing the company is inviting developers to create applications to accompany the popular streaming service. Credit: Louis Lanzano/ Bloomberg.

 

Spotify: Enlisting developers to help spread the music?

On Wednesday morning Spotify will announce that it is open for business with Web developers and publishers who want to plug into the company's vast music library of more than 15 million songs, according to two people involved in the pending press event. 

Spotify, which has garnered more than 2 million U.S. users since launching its popular streaming service here in July, is hoping that Web publishers, such as music blogs, will use Spotify to stream songs on their sites -- and help Spotify reach even more potential customers, said one executive, who did not want to be named because the announcement is confidential.

Readers of an online article about new strains in bluegrass music, for example, might click on a Spotify module to listen to songs referenced in the story. Those who aren't already Spotify customers would be prompted to register for its free service. Spotify would then have the opportunity to wean its new users off the free service, partially supported by advertising, to premium options that include a $4.99-a-month plan for ad-free service and a $9.99-a-month package that streams music to mobile devices.

Spotify officials declined to comment in advance of the company's news conference in New York, scheduled for 9 a.m. Pacific.

Announcement of the Wednesday morning event has sparked widespread interest among the music digerati. Already there are a number of theories and guesses about what the Swedish-based company will unveil, including an option to buy song downloads, which is available on Spotify's European service but not yet on its American counterpart. 

If Spotify does decide to press play on the "buy" button Wednesday, it would certainly help buttress the company's argument that its service, which lets listeners stream all the ad-supported music they want for free for the first six months, does not cannibalize music sales. Instead, Spotify executives have insisted that music sales have gone up since the service's launch in most of the 12 markets where it operates.

Executives familiar with Spotify's event, however, said an MP3 store, similar to Google's music store launched two weeks ago, is not the current focus. Spotify is much more concerned, they said, with getting as many people as possible to try out its music service. And that means seeding the service in as many places as possible for Web surfers to encounter Spotify and try it out.

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Photo: Daniel Ek, Spotify's Swedish chief executive, is expected to make an announcement in New York on Wednesday. Credit: Spotify

Warner Music chief 'very pleased' with Spotify's U.S. launch

Warner Music Group's chief executive, Edgar Bronfman Jr., who once stated that free streaming services were "clearly not (a) net positive for the industry," on Thursday said he was "very pleased" with Spotify's U.S. launch in July.

The Swedish music service garnered more than 10 million users in Europe, the vast majority of whom don't pay, prior to launching in the U.S. last month in a much anticipated arrival.

Only 1.6 million users pay for Spotify's premium service, which lets them use the service on mobile devices and home audio systems such as Sonos. The vast majority of Spotify's users in Europe don't pay, costing the company money each time they listen to a song. And until recently, labels such as Warner weren't happy with the number of free users, either, because they bring in less revenue for music rights holders than those who pay.

Bronfman, in a conference call with Wall Street analysts to discuss Warner's third-quarter financials, said he was happy with Spotify's recent efforts to induce its free users into the premium service.

He predicted that Spotify, which is currently paying more money for music royalties than it makes in subscriptions and advertising, would be profitable if it can continue to induce its free users to spring for the premium service.

"The kinds of levels that Spotify is currently achieving in Europe is also extremely encouraging," Bronfman said. "If that keeps up, they will be a very profitable business themselves."

Warner, three other major record labels and an independent label own a little over 17% of Spotify.

Bronfman's remarks came as Warner reported its first quarterly results after completing its $3.3-billion purchase by Access Industries on July 20. Although privately owned by Access, Warner continues to report its financials because it still has to pay off publicly held bonds.

The New York record company posted a 5% uptick in revenue, to $686 million, in its third quarter ended June 30 as growth in international sales offset a decline in the U.S., where Warner lost market share. It lost $46 million, or 30 cents a share, in the quarter, down from a $55-million loss, or 37 cents a share, a year earlier.

It ended the quarter with $290 million in cash, down from $439 million a year ago. The company, however, warned that that figure has since declined because it had to dip into its cash pile in order to pay for expenses associated with its deal with Access.

Company executives did not address how it would finance a possible purchase of EMI Group, which has been put up for sale by Citigroup. Warner is among four music companies said to be interested in buying EMI, which could fetch more than $2 billion in a sale.

-- Alex Pham

Photo: Edgar Bronfman Jr. Credit: Mark Lennihan / Associated Press

 

 

 

 

 

Spotify buttons up deals with Warner Music, launches music service in the U.S.

Spotify, a popular European music service with ambitions to dominate the U.S. digital music market, said it has buttoned up the necessary licenses with major record labels to launch its service in America on Thursday.  

The news has long been anticipated, since the company announced more than a year ago its plans to cross the Atlantic. But its entry has been bogged down by negotiations with music labels that have been cautious about opening up the world's largest and most lucrative music market to the young start-up. Spotify inked its last deal, with Warner Music Group, just this week.

Spotify's offerings will be largely similar to what it has in Europe, namely a free service supported by advertising and two premium tiers that let users listen without ads on computers and on mobile devices. 

The free tier will let new users listen to the company's catalog of more than 15 million songs from a computer connection for six months. After that, users will be capped at 10 hours a month and up to five spins for any particular song.

"You can still discover as much music as you want up to your heart’s content" even with the limits, said Ken Parks, Spotify's chief content officer and managing director of the company's North American business.

Subscribers who pay $4.99 a month can access the service without ads or limitations from a computer connection. A $9.99 tier also lets users listen to the service from a smart phone such as an iPhone, Android, Palm or Windows 7 device.

Spotify's service differs from online radio services such as Pandora in that it lets users pick exactly what they want to listen to, on demand. Pandora, by contrast, serves up songs that are similar to what users say they like, occasionally sprinkling in the exact artists that listeners want.

In that sense, Spotify's service is more akin to Rdio, MOG, Rhapsody, Slacker, Napster, Qriocity and other on-demand services that already operate in the U.S. But Spotify has been seen as a potentially disruptive competitor because its free offering is uniquely generous, giving users broad access where similar services offer only free trials lasting days or, at most, weeks.

Spotify also boasts one of the largest catalogs, with more than 15 million tracks from Universal Music Group, Warner Music Group, EMI Group, Sony Music Entertainment and Merlin, an organization that represents thousands of independent labels and artists, including Vampire Weekend, Adele and Arcade Fire. Competing services have anywhere between 8 million and 12 million songs.

"For the first time, American consumers are going to have access to a truly comprehensive repertoire of music," said Charles Caldas, chief executive of Merlin. "That’s been one of Spotify’s key factors in their success. They’ve been very diligent in ensuring their users have access to all of the music from all of the labels."

Labels, which have been concerned that Spotify's free service would lead consumers to stop spending money for music, have pressured the company to boost its number of paying subscribers, either by capping the free service or making its premium services more attractive. Spotify said a combination of changes to its service has helped boost the number of paying customers in Europe to 1.6 million, out of 10 million registered users.

Music labels have an interest in seeing Spotify succeed in the U.S. The five music groups that have licensed with Spotify own a combined 17% share in Spotify.

Spotify plans to open the doors to its service at 5 a.m. Thursday. Free users will need an invitation from the company (you can enter your email on the company's website to receive an invitation). Paying subscribers will not need an invitation to start using the service.

-- Alex Pham

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Spotify coming 'soon' to U.S., albeit no deal (yet) with Warner Music

The Swedish are coming! Spotify, the much-touted European digital music service, released a teaser on its website Wednesday saying it will "soon be landing on U.S. shores."

The message, which triggered waves of media coverage across the Web, didn't exactly tell the world anything it didn't already know.

But the move was surprising because Spotify does not yet have the necessary licenses to play songs from Warner Music Group's extensive catalog, according to industry sources knowledgeable with the negotiations. Spotify has secured agreements with the other three major record labels -- Universal Music Group, EMI Group and Sony Music Entertainment.

Warner, which declined to comment, sits on a treasure trove of music from Bruno Mars, Green Day, Led Zeppelin, Cole Porter and Eric Clapton, to name a few.

While nothing stops Spotify from launching without a deal from Warner, it would be hard-pressed to compete against other music services already in the U.S. market with such a gaping hole in its offerings.

Spotify's entry into the U.S. has been much anticipated, largely because the service is so popular in Europe. The Swedish company claims 10 million registered users, including 1 million subscribers who pay a monthly fee for its premium service.

Its popularity partly stems from its easy-to-use interface, which lets people sample millions of songs from their mobile phones or on their computers. Some would argue, however, that Spotify's success with consumers is also due to its generous free offerings, with lets users listen to the ad-supported service for free, albeit with some limitations.

Spotify has not said whether it will offer the same level of free access to consumers in the U.S. 

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Photo courtesy of Spotify

Apple making its move into cloud music

Preparing to launch its own "cloud music service," Apple Inc. has reached tentative agreements with all four major record labels that would allow users to listen to songs from an Internet connection.

It is unclear whether the Silicon Valley company has actual contracts with those labels -- Warner Music Group, Sony Music Group, EMI Group and Universal Music Group -- or whether details of the agreements are still being ironed out, according to people familiar with the negotiations.

Representatives of the four labels declined to comment. CNET reported last week that EMI had signed on to Apple's service.

Apple, whose iTunes music store is the dominant purveyor of music downloads with between 75% and 85% of the market, has been carefully monitoring moves by rival Amazon.com as well as newcomers to the digital music space, including Google and, in Europe, Spotify.

Amazon pounced first in March when it launched a music "locker" service, dubbed Amazon Cloud Player, that lets users upload their music to Amazon's computers and listen to their songs from any browser. Google followed suit in May with its Music Beta service.

With Amazon and Google launching music locker services in the last two months, Apple was starting to feel pressure to make its own move, said people familiar with the negotiations between Apple and the music labels.

Apple's service would differ from Google's and Amazon's in one key respect -- it would have the requisite licenses from all the major record labels, whereas Google's and Amazon's are unlicensed services.

For users, this can make a huge difference. To get around copyright rules, Google and Amazon must require users to upload their song collections, a process that can take hours or even days. With the appropriate licenses from music publishers and songwriters, Apple can simply scan a user's collection and make all of those songs available within minutes for them to listen over an Internet connection via Apple's computers.

Hundreds of millions of consumers already use iTunes to buy, store and organize their music collections, making the practical task of creating a cloud service almost trivial for Apple. The company also has the advantage of having the credit card information for more than 200 million customers who regularly purchase digital music or apps for their iPhones or iPads.

Apple may unveil a cloud service as early as June 6 in San Francisco, according to people close to Apple. That's when the company holds its annual developer conference, where last year it introduced Ping, a social network focused on music. The timing of the launch would depend on how soon Apple can button down its contracts with the major labels and publishers, sources said.

Google in particular has been frustrated by its attempts to negotiate with record labels for a licensed cloud service. At an event last week to announce the service, Google said music executives have been "unreasonable and unsustainable" in their negotiations. But label executives said Google was not able to provide enough assurances that the Mountain View, Calif., search giant would help the industry curb music piracy.

It's unclear how Apple cleared those hurdles with the labels. Calls to Apple were not immediately returned.

Apple's cloud service may work through the company's existing MobileMe service, which already lets users upload files to Apple's computers so they can access them on any Mac computer with an Internet connection.

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Spotify cuts free music access in apparent effort to appease labels [Updated]

Spotify, the popular European music streaming service, on Thursday announced it will limit how much music subscribers can access for free.

Beginning May 1, non-paying subscribers will be allowed to play a particular song five times. In addition, each user will be limited to 10 hours of free music a month. Non-paying subscribers had been given virtually unfettered access to 10 million tracks in exchange for listening to advertising.

Spotify, which operates in Europe, also has more than a million subscribers who pay roughly 10 euros a month (about $15) for premium, ad-free, on-demand access to music. Those subscribers will not be affected by the changes.

The announcement comes as Spotify continues its protracted negotiations with major record labels to launch in the United States, the world's largest market for music.

Music companies have been reluctant to grant Spotify U.S. licenses to their vast music catalog, fearing that Spotify's free ad-supported streaming service would cannibalize sales of song downloads. Though Spotify shares its ad revenue with its partners, the labels have regarded the amounts as insufficient to warrant endangering its largest and most lucrative market.

EMI and Sony have already consented to give Spotify licenses to operate in the U.S., but the Swedish digital music company still needs cooperation from Universal Music and Warner Music groups.

“This was a predictable move," said Adam Klein, chief executive of eMusic, a rival digital music service. "Their previous offer, while great for consumers, was not a sustainable business model.”

In a blog post to users, Spotify co-founder Daniel Ek argued that the limits will not impinge on listeners' ability to "discover" music, language that seems designed to appeal to record labels that want consumers to either pay for a download or upgrade to the premium service, where music companies receive higher compensation.

Spotify's spokesman, Jim Butcher, said the company is still committed to the free service, which is viewed as the primary gateway to getting its audience to open up their wallets for the premium subscription.

"The balance of paid users to active free users is actually 15%, which is phenomenal for a freemium business," Butcher said. "The free service gets users engaged with the service like no other. The number of subscribers we've attracted speaks for itself."

Now let's see whether the labels are listening.

-- Alex Pham

Updated: This post has been updated to include comments from a Spotify spokesman.

Photo: Spotify co-founders Martin Lorentzon, left, and Daniel Ek. Credit: Spotify.