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'Spotify earns us more than iTunes': Sony BMG

'Spotify earns us more than iTunes': Sony BMG

Published: 11 Aug 2009 14:10 GMT+02:00
Updated: 11 Aug 2009 14:10 GMT+02:00

Swedish digital streaming music service Spotify is proving to be the saviour of the music industry after years of falling sales. Music company Sony BMG Sweden confirms that revenues from Spotify now outstrip iTunes.

Sales of CDs in Sweden have been on the decline for over ten years and by 2008 they had collapsed to 14.7 million albums. Illegal file-sharing, widespread in hi-tech Sweden, has shouldered much of the blame.

But the explosive success of Spotify, a streaming music service launched in October 2008, has turned the financial tide for the hard hit music industry.

"Spotify is a success. Not just in terms of users but also with regard to revenues for music companies. Spotify is now bigger than iTunes in terms of our monthly revenue in Sweden," Mark Dennis, head of digital music at Sony BMG Sweden, told The Local on Tuesday.

The convictions of four people behind The Pirate Bay on charges of being accessories to copyright infringement in April, as well as the passing of tough new anti-piracy legislation, have led to a dramatic fall in internet traffic, attributed to a decline in illegal file-sharing.

"Sweden has been more prone to illegal file-sharing than other markets. Spotify came at an opportune time and has filled a gaping hole in consuming music. The low cost entry level is the secret to its appeal to file-sharers," Dennis said.

Spotify has rapidly grown to over a million users in Sweden on the back of a business model that allows users to obtain advertising-funded music for free, or alternatively for a low fixed monthly fee.

Despite the advance of Spotify's subscription service and the continuing success of iTunes, Mark Dennis still sees a future for the CD - if the music companies get the packaging right.

"Our sales of CDs have actually increased slightly in Sweden in the first six months of 2009 and still account for 85 percent of revenues. I think the transition to digital music will eventually occur but people still like buying CDs."

"Consumers are demanding more for their money though. We just have to develop the packaging and extra material," Dennis said.

Dennis confirms that the Ipred law and the Pirate Bay case have provided a window of opportunity for music companies to catch up with the consumer and the market.

"After Napster the music companies were caught napping. They did not have anyone to advise them. iTunes speeded this process up, and a relaxation in licensing restrictions has accelerated development."

He conceded that many of his arguments are those that file-sharers have being using for years with regard to the slow development of the music industry.

"I think that if you provide good services people will pay. That which has been previously lacking is a breadth of opportunities to consume music."

Spotify's success, Dennis argues, can only be good for all concerned.

"My hope is not that Spotify dominates the market but that it helps to create the incentive for other entrepreneurs to develop more services to meet demand. That way everybody wins," he concluded.

Peter Vinthagen Simpson (news@thelocal.se)

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Your comments about this article

13:46 August 12, 2009 by eZee.se
The only way "everyone wins" is when the big labels die for pushing their product down our throats for so many years via price gauging, sham lawsuits, bribing politicians, fixing laws, fixing lawsuits (tpb trial anyone?) and meddling in far off countries social services (police raid of TPB).

Use spotify's free service, but you still cant download and keep the songs you want without some additional "hacking" of the service... instead of paying the "low" monthly fee for music you cant keep, pay $5 for a VPN connection and give the finger to the IPRED law as well as the big labels.
20:25 August 12, 2009 by mosesavalon
Major labels die? Nice fantasy, sometimes I share it. But then I realize how many indie artists would be out of business if they did. These guys are the banks of our industry. Wanting majors to die is like saying I wish the banks would go under so I don't have to pay my mortgage. It's short sighted. Read this: http://www.mosesavalon.com/mosesblog/turnabout-limewire-seduces-top-digital-distributors/#comment-306
00:13 August 13, 2009 by eZee.se
Dont know exactly what i was supposed to see at comment 306 - would you mind making your point instead of me searching that thread for it?

As for the majors dying... well, one can hope right? and stranger things have happened. One last thing to remember - the smallest of the 4 are on the ropes and 2 others have posted... ummm the opposite of profits... ;) (check ezeeDOTse for references to the above) plus with more people everyday cherry picking what they want from @mazon and iTun3s as well as just pirating instead of buying full albums like the 90s (the way the labels wish)... its just a matter of time before they go the way of the dodo if they dont change business models fast - and there i will be to first dance on their graves then pee on it.
10:40 August 13, 2009 by krzyz21
Does anyone understand Spotify business model? I understand about premium subscriber thing but what about 'invite only' registrations? if its such a success, why not open up the invitations and make a rule that every registered user must log in and listen for xyz number of hours to keep account active.

BTW, I honestly think that recent music is just load of crap. My father always used to tell me during my teen days, you will listen to what I am listening now and what you are listening now, you will not be able to listen to after 10 years. He was soo true.
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