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Some recent reports reveal that Spotify has some new tricks up its sleeve. The music streaming service has met with various video content providers to explore the potential for applying its model to short, entertaining videos, available through the same service that users employ to keep their music playing.

The move apparently comes in response to Spotify’s recognition that it needs to do more to keep consumers engaged—and thus keep advertisers paying high rates to appear on the site. With data that suggest that users leave the site to watch YouTube videos when they seek further entertainment, Spotify quickly realized it could retain people better if it provided a variety of entertainment options. It has stated explicitly that for the near future, its goal is constantly expanding growth, rather than focusing on profits or revenues at this point. Currently, it counts approximately 60 million users, among whom about 15 million pay the $9.99 monthly fee to receive the premium, commercial-free version of the service.

Cheerful teen listening to music at homeThe move would put Spotify in more direct competition with YouTube, as well as with other entertainment content providers, such as Snapchat or Vessel. But by diversifying its content, Spotify might be able to lessen the challenges of competing with Pandora and Tidal. It also preempts Apple, whose new streaming music service is expected to be introduced quite soon. From a supply chain perspective, the move might help Spotify avoid too much dependence on record labels, which have demonstrated their frustration with the service in the past.

Instead, by partnering with multiple video content providers, Spotify expands the range of sources from which it can obtain its central content. Accordingly, its negotiations with video companies reportedly include a diverse panel of suppliers, from major television networks to magazine publishers to online media firms to multichannel innovators.

Discussion Question:

Would you use Spotify to watch videos, if that service became available?

 

SOURCES: Ben Sisario and Emily Steel, “Spotify Seeking Video Deals with Media Companies,” The New York Times, May 7, 2015; Mike Shields and Jens Hansegard, “Spotify Plans Entry Into Web-Video Business,” The Wall Street Journal, May 8, 2015

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