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What does Spotify’s move into video content mean

Spotify is having a go at video streaming.

For the first time, Spotify is adding video clips and audio shows to the music mix. In a press release, the company said that it will now suggest to users video shows for them to watch, much like what it did with its music service.

The move comes at a time the business is seeing a sharp increase in its net losses. According to an article on The Guardian, Spotify recorded an operating loss of 165.1m Euros in 2014 compared to 91.2m Euros in 2013. Meanwhile, its net loss was nearly three times from 55.9m Euros in 2013 to 162.3m Euros in 2014.

The article also stated that directors of the company Martin Lorentzon and Pär-Jorgen Pärson however remain optimistic adding that the company will continue to invest relentlessly in its product and marketing initiatives to accelerate reach.

Meanwhile to kick off the new initiative, Spotify is partnering up with content partners such as TED, ABC, BBC Worldwide Entertainment Group,  Condé Nast Entertainment, Vogue, GQ, Wired, CBS, Epic TV, Elite Daily and several others.

In a conversation with Marketing, Sunita Kaur, managing director, Asia, Spotify said that this upgrade is all about delivering to users a service that best reflects their needs.

“Our users are also telling us they want more – more entertainment across their day in perfect tune with their life… [We] need to deliver what our users want and that is less and less a choice between audio and video and much more about what is most effective to entertain or inspire them,” Kaur said.

She added that content curation is a big differentiating point of Spotify. Current content partners for the initiative have expressed excitement in the platform “intelligently maping out entertainment for the right moments” rather than “simply a firehose of random clips”.

“Our partners understand the opportunity to build lasting relationships by giving you the right entertainment at the right time,” Kaur said.

With the new roll-out, Spotify is also talking to several brands globally about the new initiative. Advertising wise, Kaur explained that there will not be a significant change in terms of ad formats and frequency. Users will still receive an ad break between tracks after 15 minutes of music listening.

Also just last month, Spotify announced the roll out of two new video ad products: Video Takeover on desktop and Sponsored Sessions on mobile. Singapore was the first market in Asia for Spotify to offer video ad formats for brands.

Video Takeover ads are live on the Spotify desktop and are an opportunity for brands to own the desktop app experience.  Brand videos are served as part of normal ad breaks and are only played if the user is in view. Meanwhile, Sponsored Sessions give brands ownership of 30 minute ad-free mobile sessions.  Users opt-in to an ad-free experience by viewing a 15 or 30 second video on their mobile device.

Capturing the Asian audience

Prantik Mazumdar, managing partner of Happy Marketer said the development while exciting, is an expected one. He added that the new video-based, original content would give customers a whole new range of entertainment options.

Mazumdar added the platforms success in Asia will largely be based on the scale of which they can license local content. Thus far, content on Spotify has mostly been western content that has been offered in this part of the world. Because Asia is a very fragmented market with diverse preferences, Spotify will quickly need to acquire rights from local artists for it to scale in this part of the world.

“What I am personally more excited about is their partnership model with brands such as Uber, Starbucks and Nike+ to offer customised, music related services to adjacent, niche audience segments. I think this is a very clever way to build association with some of the marquee brands globally and to tap on to their loyal customer base,” he added.

“These competitive moves are necessary if Spotify wants to keep up with the likes of Netflix, Hulu, YouTube or even Apple, which plans to launch a music streaming service soon,” Mazumdar said.

Derek Tan, executive director, Rally World Wide said that currently there is a huge battle for streaming over the mobile and the move is a “natural extension to diversify the revenue stream.”

However, he was quick to add that the list of current content partners looked promising. Echoing Mazumdar, he added that to set itself aside, Spotify needs to have a strong dependency on creating localised music based on a good mixture of the global labels and artistes already on board.

“That will drive the biggest differentiator that could determine how successful the model becomes hence localisation and a good blend of international is key,” said Tan. Tan added that with Google looking to launch its own subscription model across the regions, the biggest differentiator for Spotify will simply boil down to original content creators and how much Google can maintain its stronghold on original content creation.

“The sheer scale and unique audiences that Spotify has built and originality of owning content of video centered around music is a strong proposition. Playlists alone was one facet that had tremendous potential but more realism and content around music and artistes that they love is a huge disruptor akin to how MTV once found its niche in the past,” said Tan.

Ahmad El Hamawi, CEO of SMG and VivaKi Malaysia added that Asia posses a different challenge to Spotify and the company is still finding its feet in Asia to gain traction and momentum.

“Piracy and illegal streaming continue to be a major threat for Spotify in Asia let alone the pressure from rivals like Deezer, Google Play and Youtube who have far more number of subscribers and unique visitors,” he said. While Spotify has undertaken several local partnerships in Asia to attract subscribers, the growth will probably not be at an exponential pace when cracking down on markets such as China and Japan, he added.

However, he noted that Spotify does provide brands the right advertising platforms. He said that Spotify as a platform gives brands the oppotunity to “innovate beyond the old conventional audio commercial” with its branded playlists and branded apps.

 

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