Never doubt how Social Media can help develop and drive a brand. To give you an example of its power you need look no further than Spotify, a company that’s taken the online community by storm since it was founded in 2006 and launched in the UK in October 2008. Six months on and at a OpenMusicMedia event in London last week Spotify founder and CEO Daniel Ek confirmed that the company had just days before secured its millionth subscriber, with tens of thousands more joining by the day. To a certain extent Spotify has been challenging Twitter for UK tech media coverage in the last month. And you can see way, with a business model that is based on quality and simplicity: streaming music with almost no buffering delay to users. In fact Daniel was proud of the fact that it takes 200th of a millisecond for somebody to access content.
Founded in Sweden in 2006 from a concept first talked about in 2002 Spotify offers free access to a huge catalogue of music from major and a growing list of indie labels. And it has to be said that until very recently the majors would have been very much against opening up their catalogues to such a service, even though piracy affects their margins. Daniel and his team though had a business model that they were confident in and which would help claw back some of the 15-20% drop in revenues from CD sales alone that they have been experiencing.
The Spotify model is not about ownership, but generating income through access. And if somebody still wants ownership then they can be directed to an appropriate online retailer.
Daniel believed that the music industry could either let things stay as they are with people accessing pirated content online or give them access to a high-quality service that will generate the labels money through advertising. Oh, and Spotify streams at 160 kbit/s Ogg Orbis, higher quality than Britain’s derised 128 kbit/s Digital Audio Signal, which many people compain about.
Spotify has two business models, a free service that makes money from advertising which is heard every 30 or so minutes on a stream and the second model based on a subscription, which removes the ads and offers other exclusive content to subscribers. Daniel outlined how this paid service will work by brining artists closer to the users with interviews, demos, pre-releases, artwork and, the next big thing, portability on mobiles.
With a non-music industry background Daniel has certainly brought in new thinking to this game. He firmly believes that the future of music is about access and portability.
But how did he deal with the recent hack to the Spotify servers? Well, with just two PRs working for Spotify it took a fortnight to repair the damage. But he takes the reputation of the company seriously, he likes to meet users, like at this event, and sell them the service face-to-face. In effect making users into advocates for Spotify. And he follows comments on the company on Twitter. He was emphatic that Twitter chat helps the company stay focused on the quality of the service they offer.
As for the future, well, they are working on an iPhone app and will be making API’s available to developers and are looking at benefiting from other companies ‘issues’. I wonder if this could mean the offering of music videos to complement the streaming music service?
One thing is for sure, by going out and meeting people that spread the word of Spotify large and indie labels are taking notice of his offering and are signing up to a service that will only get better.
More from the BBC.