YouTube and Apple are launching streaming services. Where does that leave Spotify?
Earlier this month we learned Google is working on a music streaming service around YouTube. That came on the heels of reports that Apple was building iRadio, a Pandora-like streaming service. And beyond that, Amazon's cloud player streaming service has been around for two years now, although it doesn't offer all-you-can-eat listening.
They waited for Spotify and Pandora to get big enough to be meaningful. Now with 24 million active users for Spotify, 6 million of which pay to subscribe, and 67 million for Pandora, they're diving in. This reminds me of the time a few years back when, just after Foursquare beat Loopt, Gowalla, and SCVNGR in the check-in wars, Facebook announced it was launching check-ins.
That day was one of the toughest CEO Dennis Crowley experienced at the company, he said at PandoMonthly last fall. He stood up at the company's 36 Cooper Square offices and demanded his team to stop reading TechCrunch. "The only way we are going to beat these guys is if we stop reading blogs and just build the stuff that we want to build," he said. He explained that Foursquare was the only company that was 100 percent focused on building a the best possible check-in service. Facebook and Google Places could only Frankenstein together a lesser version of it.
I have to wonder if Daniel Ek has done the same thing over the last month with news of Apple's iRadio and Google's YouTube service. Granted, Spotify is further along than Foursquare was when the 800-lb social media gorilla in the room decided to compete. But Spotify doesn't have a mobile operating system, and Apple and Google do. Their entrance into the market could mean a different kind of competition.
Asked about that competition today at SXSW, Ek said he's paying close attention to his competition. "We're obviously watching what everyone's doing," he said. "Music is something that is so inherently important to people, so it makes sense for all these gigantic companies to want to be there."
He noted that, while it took Spotify two and a half laborious years to secure its licensing deals with the record labels, the trail has now been blazed. "We validated the market, so it doesn't take a new entrant two and a half years to get the same deals," he said. But Spotify learned a lot of valuable lessons in that journey that Google and Apple haven't faced.
Ek echoed Crowley's argument that Spotify will win because it is solely focused on music. "Unlike everyone else you might read about like Google and Apple -- they have tons of businesses that they want to be in," he said. "For us that's our business, we don't have anything else. We wake up in the morning and think, 'How can we get more music out to people and get people to listen to even better music and help them find new music?'"
"We wake up, eat, sleep thinking about this, and these bigger companies don't," he said.
Ek noted that Apple and Amazon face the Innovator's Dilemma with a streaming service. Apple has something like $3 billion in iTunes sales and does not know whether a streaming service would cannibalize that income. It's the same reason HBO can't offer only HBO GO as a digital-only subscription. It would jeopardize their whole business for something that's incredibly young and untested. Ek sees these businesses entering digital in a slow-and-steady pace, rather than in a fast-moving disruptive way. A perfect example -- Apple has already hit snags in negotiations over the prices it will pay to stream music via iRadio.
Beyond that, content is not a winner-takes-all game, Ek said. The world of digital content won't be controlled by Apple or Google alone. "There will be companies that are great at music like Spotify, or great at film like Netflix, or great at games like EA," he said.
[Image of Spotify House at SXSW via Billboard]