They’re singing a whole different tune, but it’s profitable.
Spotify has launched a big push into video and podcasts, announcing content deals with providers ranging from sport channel ESPN to youth-oriented brand Vice Media, as it tries to improve its offering weeks before Apple launches its own music streaming service.
Daniel Ek, Spotify chief executive, said the addition of video content was a “massive leap forward” and would draw new users to the company’s streaming service.
The Swedish group is adding short video clips from partners that include the BBC and NBC to a revamped music platform.
The revamped service included new features such as intuitive music selection for runners that selects tracks based on the runner’s speed, and greater personalisation based on users’ listening habits and tastes. The personalisation was made possible by analytics technology that Spotify acquired when it bought The Echo Nest, a data group, last year, Mr Ek said.
The launch comes amid intensifying competition in music streaming. Rival providers such as Apple and Tidal, the service relaunched by hip hop artist Jay Z, are trying to secure “windowing” deals with top music stars in which new albums and singles would be offered exclusively on their services for limited periods.
Mr Ek told the FT he was unfazed by the prospect of new competition.
“The truth is we’ve been competing against all these companies — Google and Apple — for years,” he said. “We have a very different audience to Apple. Our audience is much younger than the traditional Apple audience. The Apple audience is slightly older and set in its musical taste . . . they don’t change that much.”
Spotify is also under pressure from Universal Music, the world’s largest record company, to limit the free, advertising-supported tier of its service and push more people into paid subscriptions. Spotify had 60m active users, of which 15m were paying subscribers, at the end of 2014.
Mr Ek said that the new content “complements and extends the core music experience”, adding that users would “listen to more music as a result”.
We have a very different audience to Apple. Our audience is much younger than the traditional Apple audience. The Apple audience is slightly older and set in its musical taste . . . they don’t change that much– Daniel Ek
Spotify’s announcement comes a day after Deezer, the French streaming service, added more than 20,000 podcasts to its platform as part of an attempt to differentiate itself. Both companies are seeking to offer the kind of mix of audio that has long been available on radio.
Financial statements released this month showed that Spotify’s revenues rose 44 per cent to just over £1bn in 2014. However its operating losses widened to £165m as it made big investments in technology and marketing, while paying out the bulk of its revenues to rights holders.
As part of its drive to attract more customers, Spotify this week struck a deal with Starbucks to offer its service in the coffee company’s US outlets and give it to the chain’s 10m loyalty card holders. Starbucks’ 150,000 US employees will receive a free Spotify subscription.
Consumers are moving away from music downloads and choosing streaming in greater numbers, but streaming is becoming increasingly competitive.
Apple will next month launch its own music streaming service, which will be run by Jimmy Iovine, the former label boss and chief executive of Beats, which Apple acquired for £3bn last year.
Apple has Spotify in its sights and will use its vast installed base of iPhones and other devices to attract users by including the streaming service as an update in its iOS operating system.
Faisal Galaria, a senior adviser at Alvarez & Marsal and a former Spotify vice-president, said the move into video and podcasts was “a major shift”, given that Mr Ek had in the past talked about the “purity” of Spotify’s focus on music.
“It puts them into competition with some very big players,” he said.
However, Mark Mulligan, a music industry analyst, cautioned that “reversing into YouTube and BuzzFeed’s front lawns . . . will be easier said than done”.