Spotify’s newest carrier partner is… well, actually, it’s an old one.
The music service is today announcing it will be carried by Finnish telco TeliaSonera over its broadband, mobile and IPTV services. But this is really just an extension of the deal it announced in October with the telco’s Swedish subsidiary Telia.
The question everyone’s asking about Spotify right now is: when will it find the U.S. carrier partners that will allow it to launch across the pond, circumventing American label scepticism toward the free-with-ads model… ?
But nevermind America yet – for all the waves and in-roads it’s made so far here in Europe and Scandinavia, Spotify has racked up only two bundled-service deals since launching in October 2008 (the other with 3 UK) – despite pushing hard for premium delivery through services that already having client billing relationships, like ISPs.
Finnish customers will get to use Spotify via TeliaSonera’s IPTV service starting this summer, but so far, a third, fourth or fifth such contract, nor possible deals to take the app on to games consoles, have not been announced. Chinese mobile carriage is likely, however, through Spotify’s investment from Li Ka-Shing, the chair of 3 UK’s parent.
Like the Swedish deal, in today’s Finnish announcement Spotify says it’s given country-wide “exclusivity” to Telia. Telcos are keen on exclusivity because Spotify has become so buzzy in Scandinavia. This risks leaving Spotify without the ability to make its service truly ubiquitous in any one nation…
But, if they didn’t already have them, operators in the UK, for example, are already busy starting their own music services – Sky Songs and Virgin Media’s forthcoming project, rumoured to be called MusicFish, for example – while Mog.com is about to pitch for exactly the same kind of partnerships in the UK this year, all potentially reducing the window for Spotify.
Though it has perhaps attracted more attention, Spotify knows that its free, ad-supported offering will never support the business alone; and that is not the plan. It is an important customer acquisition tool – but why hasn’t Spotify yet signs up any more partners to deliver its premium service? Could it be that ISPs are justifiably replying: “Our customers can already get your free version on our network if they want to”?
Spotify, as it knows, needs to start tipping its income mix farther toward these premium carriage deals, because they are likely to bring in more than ads alone. Talking about music royalties at the FT’s Digital Media & Broadcasting Conference last week, CEO Daniel Ek said: “Predominantly, our deals are on a revenue share – there’s not a fixed cost – it’s based on what we get in.” That means labels only benefit from the tunes they license to Spotify if Spotify can itself make plenty of money (no wonder U.S. labels are reticent).
But the labels, at least east of New York, can be pretty happy about this, because Spotify is so good at pulling music pirates in to a legal service that has at least a chance of making good money for everyone. “We’re taking pirates, moving them in to a legal service, getting revenue from that and upselling (to premium),” Ek said.
Either way, it’s early days for what is still a startup in the spotlight, so let’s just see…