Spotify Losing Money Shock Horror!

In the Times today:

Britain’s most popular music-streaming service could be out of business within a year unless it can make more of its users pay for music, industry experts claimed today. Senior executives said that Spotify could soon be “dead” if it continued to be available free and relied on advertising to fund the service.

Daniel Ek, Spotify' founder, wrote a letter claiming that the industry "had fundamentally to change the way firms charged for songs ". But it would seem that it may be as much about the problem that way less than 10% of people have signed up for the £9.99 Freemium deal (which surprises who, exactly? c 5% is the going rate for these sort of services). In the letter Mr Ek called on the music companies to:

" stop the practice whereby Spotify has to pay them a fee every time a track was played. Instead, he said the future lay in a system where money is made through different routes, such as music downloads, advertising, merchandise and tickets to live events. "

All very entertaining, but when all its said and done Spotify is just an Internet radio station, and this is not a shape changing play, its a 5% of global Adspend game for the whole industry, tops. There have been many netmusic plays before, there will be many to come, there is very little barrier to entry - the issue is keeping going andso there is continual business model experimentation. Don't get me wrong, I like Spotify - I'm listening to it right now* - but VC's wouldn't be pumping money into something if they intended it just to be WKRP in London and have the pleasure of wrestling with the labels.

No, I'd bet my mint condition Abba Gold vinyl album that they are looking at the YouTube/Last.fm model - build something that the Media guys can't afford not to buy a few years down the line, and charge 'em a premium for it. This is Built-for-M&A 2.0.

*Bowling for Soup, if you must know.......