Tag: Universal

Is Spotify finding the Business on the Move?

Spotify was a breath of fresh air when it hit the markets. Finally, there was someone who combined the ease of iTunes with unsurpassed breadth in catalogue. Lots of songs. Always available. And even the ads weren’t all that bad (which is why few people upgraded to the ad-free premium version [more on this below], much to the dismay of label executives who – rightly – fail to see the greater good of dependable revenue streams from those few ads; although they are getting more, mind you).

Then, back in July, Spotify submitted its iPhone app to Apple. And the big wait began. After lots of back and forth and speculation if it would or would not, Apple finally approved the app. So now it’s live, and not only on the app store (where it ranked #1 on the UK store when I checked tonight) but also on Android Market. A Symbian version is in the works.

All reviews I have read are raving: from “very impressed” (and that’s the Daily Telegraph no less) to having “to pry it out of my cold, dead iPhone” (Wired), everyone waxes lyrical about the thing. It comes with a load of stuff, too: streaming all your favourites from over 6m tracks on the go sounds promising, and one can also sync up to 3,333 (what a number!) songs for offline use in the networks’ broadband doldrums.

The trouble (!?) is: you can only use it as a premium subscriber, which means forking out £10 per month. Which brings me conveniently to the key point, which is the business underlying model.

The labels are fairly happy, it seems. Because they got shares in Spotify itself. Some more equal than others though: the majors are said to have received a disproportionately high stake). The same report claims though that ad income is only £82,000 and, in the UK, only 17,000 users had signed up for the premium version. However, shareholders and all that, Spotify still has to pay the labels a fee per streamed track, irrespective of the user paying or not. Tricky model, that. Note though that this might be different in other countries: according to reports, the world’s largest major, Universal Music is making more money from Spotify in Sweden than from iTunes!

Anyhow, all this was before the mobile app, and mobile may well be the game-changer for them… The launch of the iPhone app, glorified niche audience or not, seems to have gone fairly well (#1 position on fhe app store within days of launch). Spotify reckons that mobile is where its future lies. And this had been echoed (and well ahead of the actual launch!!!) by others in the industry, and perhaps rightly so: if users are used to (and in love with) a service they are more likely to pay for it if that means they can also have it whilst on the road. For the marriage of music with the world’s leading MP3 player come mobile phone, the iPhone, this seems to be made in heaven: I can have the smallest model and still carry 6m+ tracks around with me? Wow! Here’s value-add!

The much-discussed freemium model it is then: get them hooked on the free desktop app and convert them to paying users on mobile. It has long been known that users are more likely to pay if stuff is portable (I can still recall the disbelief of music executives when they realized that people would pay more for a monophonic ringtone than for a full-blown music track). And whilst now the link between (free) basic service on the desktop and (premium) mobile service is new, the principle is old and proven: and it is simply added value (plus the little things like being used to paying on mobile and having convenient existing billing models in place). If the user perception is that they are getting value for money, they are willing to pay. And if it is for such a fairly special thing such as music (don’t we all love and nurture our very own musical mix tastes?), the step is even easier to make.

Spotify fully expects this to fly: they are upgrading their servers already. Labels are said to be still a little jumpy but I reckon their experiences over the last decade or so have shown that their is a need to re-think incumbent models…

Mobile Music on the Rise: 40-45% of Digital Revenue for UMG

January is MIDEM time (even though, sadly, I cannot go this year), which means that music dominates the news. In an interview, the EVP of Universal’s eLabs, Rio Caraeff on the revenues of Universal Music Group that:

“about 40 to 45% of our overall digital business is coming from mobile channels like Verizon and AT&T. […] On much of our frontline pop or R&B or urban releases […] we’re seeing mobile comprising 20-45% of the [overall] revenue for those artists.”

Wow! Universal’s digital sales have been growing by 33% during the first 3 quarters of 2008, and they seem determined to fully converge “online”, “mobile”, etc into one:

“The consumer doesn’t want a mobile-only experience – they want an all-digital multi-platform experience. They want to consume their music on their mobile handset [and] on PC and other online platforms. Partners like Verizon and AT&T wanted to have multi-platform online experiences as well. […] Now at Universal, we don’t have a mobile business. We don’t have an online business. We just have one multi-platform digital business.”

Amen to that! And how right he is. Universal also adapted pricing, so that a song costs the same no matter on which digital platform you buy it. And, apparently, mobile storefronts play a role, specifically Amazon‘s MP3 storefront, which is pre-loaded on the G1, the first Android phone. So it’s app stores (or markets) all over this year, huh?
This shows that the majors learned from the pain of recent years and now get a grasp on the digital world. Good stuff that!

Adobe Flash Opens Screens

Flash maker Adobe isn’t tiring on bringing out news these days: this time it announced the “Open Screen Project”, in which it is partnering with a plethora of mobile industry giants, namely ARM, Chunghwa Telecom, Cisco, Intel, LG, Marvell, Motorola, Nokia (see also here re Microsoft‘s Flash competitor Silverlight), NTT DoCoMo, Qualcomm, Samsung, Sony Ericsson (see also their initiative to marry J2ME and Flash here), Toshiba and Verizon Wireless as well as major media players such as the BBC, MTV Networks and NBC Universal.

It said “the project is dedicated to driving rich Internet experiences across televisions, personal computers, mobile devices, and consumer electronics. Adobe said it would open access to Flash technology, accelerating the deployment of content and rich Internet applications (RIAs).” This will include:

  • Removing restrictions on use of the SWF and FLV/F4V specifications
  • Publishing the device porting layer APIs for Adobe Flash Player
  • Publishing the Adobe Flash Cast protocol and the AMF protocol for robust data services
  • Removing licensing fees – making next major releases of Adobe Flash Player and Adobe AIR for devices free

Adobe says its Flash Player reaches over 98% of Internet-enabled PCs and more than 500m mobile devices today. It now expects more than 1bn handsets to ship with Flash technology by the end of 2009 (this means a year faster than previously forecasted). Flash technology is used to deliver vector graphics, text, interactivity and application logic, video and sound over the Internet. Currently, more than 75% of broadcasters who stream video on the Web use Flash technology (YouTube will be a big contributor to that number).

Following my many posts on mobile Flash (see e.g. here and here), this now looks like a real assault on the medium. Given that Flash reduces developer cost (less porting because of vector-based graphics) means it is a likely boost to the content industry: more and richer content at lower cost. Could this be it?

Modu is raising a big round

One of the quirky stars of this year’s Mobile World Congress, Modu, is apparently scoring a large round of funding, namely to the tune of $100m. The company adds to $20m funding previously raised from its founder Dov Moran (who had sold his previous business for $1.6bn to SanDisk), two Israeli funds, namely Genesis Partners and Gemini, and indeed SanDisk. The round values modu pre-money at $150m, which is healthy for an 18-month-old company but, according to the press, still $50m less of what Mr Moran had hoped to score.

Modu is an interesting concept that shrinks the key bit of the phone (including SIM card, address book, etc to a matchbox size, which then can be slipped into a variety of so-called “jackets”, fancy phones that can be adapted to whichever occasion the user might find appropriate or indeed “mates”, which enable other consumer electronics devices with the bliss of connectivity and the like.

The challenge may well be that the jackets and mates are supposed to be developed by third parties, and to convince enough players to do that (which is arguably required to create a compelling offering) might be the biggest challenge.

In time for Barcelona, Modu had announced a number of partnerships, including operators Vimpelcom (Russia), Cellcom (Israel) and TIM (Italy). Blaupunkt, GPS specialists Magellan Navigations and – again – SanDisk have apparently pledged support, too. On the content side, the world’s largest music company Universal Music, navigation service provider TeleAtlas and a few more are in the mix.

I really do like it and I really hope that they’ll pull it off. Somewhat clearly thought out of the box here, and that deserves praise!

Update: Modu has just received recognition of a Guinness World Record for the lightest mobile phone (at 40.1 grams and dimensions of 72.1mm x 37.6mm x 7.8mm).

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