Wesley Verhoeve

For the first few years of the owning vs renting debate on music consumption, I’ve been strongly committed to the ownership model. Slowly, I’ve moved away from ownership in other realms of consumption. I do not own any DVDs, I rent/stream from Netflix. I almost always give books I buy away to friends once I’m done with them. I don’t own a car, but I’ve used Zipcars. Music rental has been tried a few times before, either badly done, or badly timed. It seems like that’s about to change. A service called Spotify is making waves in the European market as they prepare an entrance into the North American one. Bob Lefsetz has been praising the service for a few months now, and the Swedish Wire reports the following.

“According to record label executives, Spotify – launched last year – has already become more important than Apple’s music store iTunes. “iTunes is going really well, but Spotify is growing rapidly. There are signs that a large number of illegal downloaders are turning to Spotify”, said Mark Dennis, head of digital sales at Sony in Sweden, to the TT news wire. Also in terms of revenues Spotify has overtaken iTunes. “In five months from the launch Spotify became our largest digital source of income and so passed by iTunes”, said Per Sundin, head of Universal in Sweden. “It’s a fantastic development explained by the fact that Spotify really has exploded”.

In my opinion the real reason a service like this could take off right now is two-fold:

• Increased Usage of SmartPhones - As more people buy devices that can stream content from the cloud, more will look at ownership as inconvenient, choosing streaming memberships as much more attractive. This would especially be the case if Apple approves the new Spotify app.
• Spotify offers a value proposition interesting to illegal downloaders - Lets be honest, most of the time illegal downloading is a pain in the butt. You have to search for files, wait for a download that may or may not be password protected, re-tag mp3s, etc. However, it’s still preferred by most people to buying an album on iTunes for $10 or more. Here we see the convenience vs cost dilemma play out in favor of the frugale. However, if you can stream, at all times, all the albums in the world for $10 per month, then convenience will win out, and you’ll consume more music to the point that cost will also be a major factor.

I’ll be interested to follow Spotify in their entry into the US. If Apple was smart they would launch a competing service before Spotify enters the market, and they would block the Spotify app from iPhones. Check? Mate?