As you may have heard, Google yesterday announced its Google Play All Access music streaming flat-rate plan at its I/O 2013 conference keynote. I posted about my strategic take on what this means for Spotify’s business model on Twitter and LinkedIN. A friend of mine challenged my assertion by asking about the role of the inertia of the crowd (a term often heard in relation to social services). I figured that a short answer may not suffice, as the topic is quite complex, so I reactivated this blog and wrote the following answer.
Inertia is a factor when it comes to deeply socially integrated services that possess personal data that is hard to migrate, as we have seen with the transition from studiVZ to Facebook in Germany.
Spotify, with its Facebook integration and recent follow mode update, is indeed integrated into our social lives. But is it integrated enough to cause the necessary inertia when it comes to its central features as a music streaming service? Let me explain in more depth why I think Spotify does hardly stand a chance.
1. Social & Discovery
Undoubtedly, lots of users use Spotify’s social services. But when it comes down to the core social features, all I want to do is discover music that my friends are listening to and share mine with them. Google has 343 million active users as of January 2013 (more than Twitter). Those are enough connections for a decent market penetration. Spotify has a conversion ratio from user to paying subscriber of 16 to 27 percent, depending on who you ask. Math experiment: imagine 10% of G+ users signing up for a free month of Music, and 10% of them signing up for a paid plan. That would already be more than half of Spotify’s paying customers – but I don’t think Google will stop there. They don’t have to – like with G+, they have all the time (read: money) in the world to grab market share. Back to social: Yes, G+ has little activity (7 min/week as opposed to FB with 7 hrs/week), but that is not a factor when it comes to socially connecting you to what music your friends are listening to. It’s just about your existing G+ connections as the backbone – discovery happens within the app, anyway. Also, I guess that Google Play Music All Access will trigger more G+ signups than any service before, helping Google to ‘fill in the blanks’ of your social network. One more thing: Google will enable you to discover relevant music right from the very first time you use the app, because they have enough relevant data and great algorithms to do so.
2. Product & Integration
Spotify’s UX is decent, but that’s it. Having seen what Google has up its pipeline at Google I/O 2013 yesterday, I’d bet a hundred Euros right now that Google will outpace their UI in no time if not at product launch. But UI is not everything. To really make Google Play Music All Access a compelling service, the whole UX must be superior to Spotify (and of course to Apple’s, but I’ll leave that out of this discussion for means of simplicity). Google inarguably has the best machine learning that’s out there right now, and the most data to feed to its algoritms. Their endless, interactive, self-learning radio playlist will have a UX far beyond what we have come to know since the early days of scrobbling (hat tip to last.FM). I do not doubt at all, that their UX will be superior to Spotify’s.
3. Catalog & Pricing
I hardly believe anyone would doubt that Google will have no problems in keeping up with, and eventually outpacing Spotify’s catalog. Imagine 30% of Spotify’s paying subscribers moving to Google. That would mean a much lower budget. Contrary to Google, Spotify cannot substitute their budget with revenue from other services. That is a major weakness in the war for the streaming music market, especially in terms of innovation and marketing. With $7,99 as an early subscriber price and a much longer financial breath than Spotify, the cost race can not be won by Spotify.
Let’s take a look into the ‘Strategic Foresight Crystal Ball’. Just imagine Google integrating music videos into Google Play Music All Access. They certainly could. I can hardly imagine Spotify playing catch-up with that.
Google certainly won’t be the only one to help digging Spotify’s grave. Services like Apple’s own streaming music service, Deezer (available in 182 countries vs. 17 with Spotify)
Bottom line: G+ Play Music All Access (despite its clumsy branding) will of course first attract early adopters and techies like me (and you?), but by seriously outpacing Spotify in all of the relevant disciplines like social/discovery, product/integration and catalog/pricing, it will win more and more market share and – just my two cents – first outrun and eventually kill Spotify.
More than that, I assume that when it comes to simple services that rely on social only as a backbone for connecting users and do not have power over massive amounts of relevant data that is hard to port or deep integration with other relevant (company-domestic) services to offer, giant global service providers like Google will almost always certainly win over their market share.
Please note that I am in no way affiliated with neither Google nor Spotify, and that this is my objective analysis as a strategic advisor.
Some related articles:
Spotify scared: http://www.huffingtonpost.com/2013/04/10/spotify-new-subscribers_n_3047638.html
Spotify: are 6 Million paying customers enough? http://readwrite.com/2013/03/13/spotify-six-million-paid-subscribers-growth-quick-enough
Spotify’s conversion ratio and user numbers: http://evolver.fm/2012/07/31/spotify-hits-4-million-paying-users-but-how-many-people-really-use-it/