NORTHWESTERN BUSINESS REVIEW Saturday - Oct 25, 2014

Spotify: The Next Step in Digital Music Innovation


In the 70s vinyl was king, the 80s brought cassettes, and the 90s presented CD’s. Meanwhile, music technology has continued to innovate in the beginning of the 21st century with the introduction of iTunes and other music downloading sites. But are we now on the verge of a new way to acquire and listen to music?

This summer, a Swedish-based music platform known as Spotify was released in the United States and has gained popularity at an enormous rate. Within in one month of its release, Spotify rose to 1.4 million users and it does not look like the platform is slowing down any time soon. What makes Spotify a game-changer in the music industry? As a free music platform streaming music instantaneously, Spotify changes the way music lovers get their fix. The music platform blows services like Pandora Radio out of the water by allowing users to choose the songs they want to listen to and create their own playlists. The service even rivals Apple’s iCloud, as paid users possess the ability to upload and stream their own “local music” and stream any song from a 15 million song database on any device.

Spotify’s meteoric rise can not be solely attributed to their inventive interface. The company’s social media integration is another reason why Spotify is changing the music downloading industry. Spotify allows registered users to integrate their account with existing Facebook and Twitter accounts. Facebook integration is compulsory for new accounts. Once a user integrates their Spotify account with other social media profiles, they are able to access their friends’ favorite music and or playlists. Additionally, Facebook compatibility allows Spotify users to share music with Facebook friends through the use of the service’s inbox. Spotify users are able to send tracks or playlists to friends who, in return, are able to access this music through their Spotify account. This use of social media to increase popularity has put Spotify in the spotlight with recent reports suggesting that the Swedish firm is in advanced talks with the Russian-based venture capital group Digital Sky Technologies with possibility of a $100 million investment that could value the firm at somewhere between $1 billion and $2 billion.

Spotify has also managed to have a positive affect on the “black market” of music downloads. Having the option to stream millions of tracks supported by an occasional ad, or free of ads for a small monthly fee, Spotify appears to be serious competitor to music piracy. Through quarterly surveys done in various European countries researchers have polled the music consumption habits of thousands of people, and in their most recent report they find that music piracy continues to drop. Since 2009, the numbers of people who download music illegally has decreased by more than 25 percent in sweden, and over the last year alone it dropped by 9 percent all throughout Europe. This downward trend in music piracy is most likely due to Spotifys gains in popularity throughout Europe. If the service can continue to gain momentum the online piracy may decrease in the U.S as well giving much relief to dozens of record companies.

All-in-all, Spotify is an amazing innovation for digital music lovers. But what about the long-term effects on record sales and the music industry? The music platform makes it possible for people to consume as much music as they like – granted, for a small fee – without owning it. Sure, the record companies will be receiving their royalties, but will it be enough if people stop buying albums in favor of streaming online? The question is definitely one to consider. What is clear is that Spotify is taking the music industry in a refreshingly new direction and, either way, it will be interesting to see where the innovation leads.

Spotify investor and Napster co-founder Sean Parker on the music platform’s innovative concept via The Daily Beast:

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