Can Spotify Make Money From New Free Stream?

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Dec. 11 (Bloomberg) -- Bloomberg senior West Coast correspondent Jon Erlichman reports on Spotify’s new free streaming service on Bloomberg Television’s “Bloomberg West.”

Spotify is opening the new free streaming mobile service and partnership with led zeppelin.

On the road to kashmir.

Insert your pun but today in an event it announced a free service meaning customers no longer have to pay $10 a month.

The band has thus far avoided all digital streaming rights but given them to spotify and it is making pandora investors nervous.

They are selling off on the newly robust spotify.

John ehrlichman is in los angeles.

What do you think of this?

I'm somebody who had already been testing the limits of what spotify was offering for free.

Their radio service -- you were not paying?

I'm cheap.

You will hear it here first.

But at its core you think you want the premium subscription.

Let's give them a taste of what streaming is all about.

There are some restrictions compared to what you get if you were actually paying.

But the hope is you will try it and maybe you will become a paying subscriber.

They had told us they had more than six million paying subscribers.

We don't know a lot about the financial story because they are private but there is talk they may go public and they want the business model that netflix has.

Millions of paying subscribers generating review which a lot of it goes toward paying the talent that you are listening to on spotify.

They also are launching 20 new markets.

What does that mean?

It tells you the story of spotify versus pandora.

Latin america, europe.

This is a company that from the beginning the owner said to make it successful i will have to have these specific deals with the music labels.

That became very helpful thinking when tit came to rolling them out around the world.

Pandora is not very international.

It is a company that has operations or offerings in australia and new zealand.

But because spotify goes directly to the labels to negotiate the deals it has had more flexibility on that side.

Obviously everybody has international ambitions.

We had the c.f.o. of pandora who said if they can get better licensing terms they would like to be doing a more spwpl strategy.

Not knowing their financials they did talk about the fact they put something on the website saying they had spent $500 million in the last year paying rights to artists and that is is 70% of revenues.

That would put them at about $714 million in revenues.

Big business and one to watch.

I know you will be watching them.

I was at the event this morning.

I talked to their chief content officer and asked him to describe how the service works.

Take a listen.

It allows free users to experience the service on the device of their choice.

They usually do it on a mobile device.

When we launched in europe it was a different world, clear thing with computers and desks and they were introduced on the desktop and upgraded to get it on the mobile.

The majority are now on board on the mobile device.

It is important we keep themmen beginninged.

It is all about an offering that keeps people engaged.

It also increases what they can access on the mobile devices.


You don't get all the benefits of premium.

They get the experience and get the bill collection and play listing and all of those cool features while maintaining the clear benefits of the premium of no ads and off on cash.

They can create their own play list and listen to ads intersperse ed interspersed?

That's correct.

But it is different and better than radio in that if you want to listen to nothing but been marley you can do that.

It doesn't have the limitations that dmca has.

I remember the story that frank sinatra's concept of capital with his columbia contract said he was specific as to medium.

When c.d.'s came around they had to renegotiate a deal.

For a long time there was no sinatra catalogue on c.d.'s. are there contracts like that that you have to wrestle with?

There are some.

Certainly it is a short list of artists that retain the rights to say yes or no.

The vast majority of them don't enjoy that.

For some it is not uncommon to have the approval rights which makes it gratifying to us if they said we want to embrace this model and introduce our catalogue to a new generation of fans.

Is there going to be a time when you don't need a record label?

You are talking about a catalogue but new music is a big thing.

There is talk about not really promoting labels.

You surely get approached by acts that want to go direct.

I think that is exaggerated.

They are our most important partners today.

That will be true for years to come.

It is true that it is easier to make a record today than it used to be but still the label system provides a valuable source of capital to mac records and marketing -- make records and marketing muscle to cut through the clutter that exists.

They are an important part of the landscape.

I can look at pandora's book and know their cost of goods.

I can't look at yours.

I wonder what the progress has been about lowering your costs which you would like to lower and "the artist"s would like to see go in the other direction.

We think the artist deserves to profit and it won't unless it aligns itself with artists.

As our co-founder mentioned today, we still pay out approaching 70% of review to the rights holders which includes the artists.

We are proud of that.

We think everyone deserves to make a dollar.

The radio stations are paying single digits, right?

One of the cool things we announced last welcome is a new level of transparency in terms of how this model works.

We launched a website that we call spotify for artists and provides a detailed window on how this works.

So check it out.

There's been a lot of speculation that you have spent over $500 million this year paying for million.


And $500 million about of that.

This model, we would not have this conversation if this model were not working so well to take users who were not monetized or poorly, radio is one you mentioned and converting them to a much higher valued way of consuming music.

At the end of the day we have to continue to do that and again to go back to a point we made earlier, we are trying to get more people into this.

It is a very efficient way to move people from no pay or little pay to a much higher payback to the industry and that is about getting more people on that efficient conveyor belt.

That was spotify's chief content officer.

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This text has been automatically generated. It may not be 100% accurate.


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