Wednesday 13 February 2013

Spotify now available in Italy: this is the way to go

It was only yesterday that I wrote a post in which I ventured to say that the future of entertainment industry relies on the introduction of innovative services, rather than anti-piracy campaigns that in some cases have come to resemble Don Quixote-sque attacks on digital windmills. So I have to say that I was quite delighted when I read on main Italian newspapers (eg here and here) that since yesterday Spotify is available also in the Bel Paese (the country, not the cheese). Indeed, as commented by the Huffington Post, for Italian music lovers the launch of Spotify felt like Chistmas day.

Besides Italy, yesterday the popular music-streaming service which was first launched in Sweden in 2008 became available also in Portugal and Poland, thus reaching the number of 20 countries around the world where consumers can access it.

This service is fully licensed and, according to IFPI (the International Federation of the Phonographic Industry), in Europe in 2011 Spotify was the second single largest source of digital music revenue for record labels.

There are three ways to enjoy the music available on Spotify: Spotify Free (free instant music on users' computers, featuring ads), Spotify Unlimited (ad-free music available at the price of EUR 4,99 per month) and Spotify Premium (downloadable music which can be accessed everywhere from any device and is available at the price of EUR 9,99 per month).

The model proposed by Spotify has become highly successful. According to Wikipedia, total users reached 20 million by December 2012, one quarter of them being subscribers to Unlimited or Premium.

Streaming music does not
necessarily involve
24/7 performances
As far as the Italian market is concerned (and with which this blogger is slightly more familiar than the Portuguese or Polish ones), the launch of Spotify is almost revolutionary, as the presence of on-demand audio streaming services is still limited in this country.
As reported by IFPI, it was just in 2011 that services such as rara, Sony's Music Unlimited and Telecom Italia's Cubomusica were launched, while French Deezer became available in 2012, together with Samsung's Music Hub.

Although in the past decade the trade value of recorded music sales has more than halved in Italy, according to FIMI (the Italian Music Industry Federation) in the first half of 2012, sales of digital music (download or streaming) raised by 43% and currently the trade value of digital music amounts to 33% of the entire Italian music market.
The launch of Spotify may result in these numbers getting even higher. According to Enzo Mazza, FIMI chairman, "according to latest statistics, in Italy streaming represents a huge opportunity: in fact in 2012, trade revenues from streaming music were up 77%."

As also demonstrated by some recent case studies, the presence of a digital sales channel is important to encourage the legal acquisition and use of works. In fact, when a digital sales channel is not available, users will probably turn to piracy and begin to consume much more content through illegal channels than they had previously purchased legally. This is because piracy has high fixed costs but negligible variable ones, the fixed costs being those associated with the purchase/rental of copying devices and the variable ones those influenced by the level of output, ie the amount of pirated material. Once the fixed costs have been paid, it is unlikely that users, who have the choice between free pirated and lawful fee-paying content, will decide to switch back to obtaining content lawfully.

These considerations demonstrate the importance (which has been recognised also by EU Commission President José Barroso) of developing a level playing field for new business models and innovative solutions for the distribution of creative content in order to counteract the growth and spread of pirated works.

So, good luck to Spotify and similar innovative services!

1 comment:

David said...

You describe Spotify's business model as 'successful'. Last time I checked, Spotify was still losing money, and the bigger it gets, the more it loses. The only way it can start making a profit is to increase the proportion of paying subscribers, and I don't think extending into territories like Italy is going to help.