Why All The Excitement Over Spotify?

The cacophonous blog buzz and tech site chatter about the Swedish music service Spotify has gotten so out of control I simply couldn't ignore it any longer. What the hell is all the excitement about? Allegedly Hong Kong billionaire Li Ka-shing and other rockstar investors have already bet up to $50mil on Spotify. Is this the off-the-heeziest music app ever? Is it gonna save the music business? Well I haven't tried yet, because I can't here in the US... it's currently only available in UK, Sweden, Norway, Finland, France and Spain online and on iPhone and Android. But, I've been doing some book-learnin' about it.

Fundamentally Spotify is an ad-supported and subscription-based online and mobile music streaming service that allows users to access up to 4.5mil tracks from all the major labels and put them into playlists. The mobile service, which works on both 3G & WiFi, also has a cool feature that allows you to locally cache over 3k tracks for playback where you have crap coverage... which will be very useful in the US. Online you can opt to listen to ads and have free access, on mobile it's always a monthly subscription fee in the €9.99/mo range, we'll see what they come up with for the States ($12.99/mo?). Aside from a few minor gripes about the iPhone version, mostly around volume controls, remote-control issues and inability to run the App in the background (a broader iPhone issue), reviews of the UI, OTA syncing and playback performance of the mobile service have been overwhelmingly positive. Sounds totally awesome, right?

But wait, isn't that uh...er... Rhapsody? The music service run by RealNetworks that launched way back in 2001? The free service model may be a little different, but overall the model is pretty much the same. Hell, Rhapsody even has an iPhone App... that's available now in the US. Granted their iPhone App doesn't have the offline playback features and it reviews have been pretty mediocre... and the core service doesn't have some of the cool collaborative functions Spotify does. However, my point is that Spotify is not really a groundbreaking idea. It looks even less so when compared with the bevy of interesting twists on this model, including Pandora (which I'm a big fan of) that creates streaming radio stations for users (online & mobile) based on their musical tastes. There's a bunch of interesting music subscription choices out there for consumers and, unfortunately, so far none of them could be characterized as a financial success story (after all these years Rhapsody still has under 1mil paying subs).

All this leads me to believe that Spotify is not going to be the music industry's super-App (savior App?) simply by virtue of being good and being available on multiple platforms. Success for Spotify (and I wish it for them) will all come down to marketing, merchandising and eventizing this App to über-jaded consumers, who are currently being overwhelmed by online and mobile entertainment application clutter... and who are being more conscientious than ever about managing their monthly recurring expenses. Hopefully Spotify has put some of that $50mil aside to keep the hype alive.