Spotify, the much loved (by me) music streaming service in the UK is set to launch in the United States within weeks. However, the service may have strong competition looming with MOG set to present the day before Spotify at SXSW.
Berkeley Based MOG, a streaming music startup is looking to capitalise on the growing trend for ad funded music and premium music apps. But both may have difficulty capturing the US market.
MOG will launch their App on March 15th, the day before Daniel Eck takes to the stage in what is expected to be the announcement for Spotify US launch. The premium app scene is set to be very important area for both companies as advertising revenues are not always strong and fluctuate with the economy, whilst the app revenue is more solid but smaller in numbers.
With one of the four major music labels, Warner Music withdrawing support for free or ad-supported music streaming sites, the pressure is on to convert free listeners into paying customers. The Spotify app, currently available in the UK and selected European countries is generating £2.5m revenue per month from their £10 a month premium subscription which opens up access to their mobile app. The number of paying subscribers pales substantially against the total number of users listening for free with ads. It is estimated that the 250,000 paying subscribers represent just 5% of the total listenership.
The challenge for both parties will be to convince the listener that paying for music has a value. With so many listeners finding free music online with services like Twones, they may be reluctant to pay £10 per month. The fact that they never ‘own’ the music will also be an issue to get over. The Spotify function for offline access goes a little way to covering the issue of ‘owning the music’ but the price tag has met with much vocal opposition. As the app becomes the focus for the premium service, the race is on to make it that ‘killer app’
And public opinion is of no value if the company’s can’t turn a profit on this activity. Ad Funded music models are not new, and are rarely succesful. If the estimation of Spotify’s £9m licensing costs every month was even close to being correct, the small matter of £2.5m income becomes a moot point.
The launch of MOG, with an estimated price tag of $5 per month, and access to 6 million songs will no doubt dent the Spotify game plan in the US, but they won’t have it easy. Spotify has succesfully reinvented the ad funded music model from a PR perspective, if not a financial one. The winner in this battle may be the one that converts the premium customers the quickest or the one with the deepest pockets.
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