Rumor has turned to reality. Two weeks ago we reported that music service Spotify and telecom carrier Sprint were talking about a bundling plan that would put Spotify in front of Sprint’s 54-million customers. Today, the deal is done.
“In the U.S., Spotify is really strong on the coasts, but we’ve got to hit mainstream America.” –Daniel Ek, Spotify founder
The agreement is a major step in Spotify’s marketing effort. Spotify has telecom partnerships in other countries, but this is its first U.S. deal. In January, competitors Beats Music and AT&T forged a similar bundling agreement.
The Swedish-founded service does not disclose audience metrics regularly, but it is known to have signed up between two- and three-million paying U.S. subscribers. Analyst estimates of global Spotify subscribers fall below 10-million. Some multiple of those numbers takes advantage of Spotify’s ad-supported free listening. Spotify’s audience numbers indicate how nascent streaming music still is, despite its newsworthiness, controversy, and impact on the music business.
On Sprint’s end, the bundling of music into its cell-phone offering is designed to promote and enlarge its “Framily” plan, in which families and their friends group together for cheaper service. The larger the Framily, the bigger the Spotify benefit. In addition to growing the Framily plan among existing users, Sprint hopes to attract new users with its inclusion of a robust music service built into the phone service.
The bottom-line advantage for Sprint customers is a free trial of Spotify’s premium subscription scheme, which offers commercial-free listening and on-demand access (with unlimited downloading) to its enormous music catalog. Framily groups get a six-month premium trial. After that the payments begin for converted users, with large Framilies (over five members) receiving a 50% discount — $5 a month instead of the normal $10 price. Smaller Framilies will pay eight bucks. (After 18 months, everyone pays the 10-dollar full price.)
Non-Framily Sprint customers get a three-month trial and convert to full-price subscribers.
The importance of a telecom bundle lies in exposure, price discounting, and ease-of-payment. If a consumer hurdle to adopting a music subscription is the reluctance to drag out a credit card and start a new monthly expense, slipping a discounted price onto an existing phone bill streamlines the decision.
Spotify founder Daniel Ek acknowledged the uphill climb. He was quoted in the New York Times saying, “In the U.S., Spotify is really strong on the coasts, but we’ve got to hit mainstream America.”
The big story here is not that Spotify is going to be on Sprint phones preloaded, but that it may not be such a big draw after all.
I’m not hearing any talk of BeatsMusic, iHeartRadio, or the half dozen others discussed here regularly. Until a service can match Pandora on human-generated categorization of music (think Pandora’s mjusic genome prodduct) and not some canned version like Echo Nest which I’ve found gets it wrong on a regular basis, we’ll not see anyone gain much more than enough to say they can live to see another day. Music categorization has to be human-powered, not machine generated, to see the results that these companies want.
Jim, thanks for the comment. I understand your point. Pandora’s genome works well for my ears, too. But part of what’s missing from mainstream adoption of music services is exposure. Sprint might show Spotify to millions of potential users who have barely heard of it, or of music streaming at all — including Pandora. So it might not be about who does it best (which is subjective), but who is positioned best. As for Beats/AT&T, we don’t know for sure what’s going on in there. 🙂