Could Spotify become the next Netflix?
Business Insider reports that Spotify may expand into a streaming video service
Spotify wasn't the first streaming music service, but it fundamentally changed the way a lot of people listen to music. You can listen to whatever you want, as long as you're willing to put up with commercials or pony up for its $10-per-month premium service, which gives you better sound quality, no ads, and access to its music vault from your phone or tablet.
The problem for Spotify, though, is that profit margins for streaming music are thinning. Every time you press play, the service has to pay a healthy percentage to the record labels that actually own the music rights. Spotify initially hoped that scaling up fast and amassing a large audience would tip the balance of power in its favor to negotiate better licensing rates. But the reverse actually happened: A flurry of Spotify-style competitors emerged overnight to fight for the same content rights, effectively reducing each company's bargaining power and allowing the record labels to demand fat royalty checks.
With music offering diminishing returns, the big question is whether Spotify can expand. According to two unidentified sources who spoke to Business Insider, Spotify could be looking at a company from another area of the digital realm for inspiration: Netflix.
Yes, despite some unfortunate growing pains, the golden child of streaming video has been widely lauded for gambling big on original content, particularly its $100 million showcase House of Cards. The high-profile drama "isn't a gimmick to lure in new Netflix subscribers," says Matt Yglesias at Slate, but rather "a sunk investment that Netflix is making in the hope that it will prop up its new brand identity and gain experience."
The strategy, in fact, isn't so dissimilar from the one employed by HBO, which initially broadcast unedited versions of movies, but went on to produce multi-million dollar franchises of its own like Sex and the City, The Wire, Girls, and Game of Thrones. Now, says Business Insider, HBO is "the premier property in Time Warner's most profitable division," proof that consumers are willing to pay for original content.
Which brings us back to a video-streaming service for Spotify, which isn't too hard to imagine. Unlike YouTube, the service does a relatively good job of putting quality content (i.e., the stuff you're actually searching for) front and center. Spotify's search-friendly user interface (recent redesign choices notwithstanding) could give it an edge over Netflix or even HBO Go, since Spotify is ideally fashioned for consuming media in binges, which is the way many people watch TV these days.
Of course, these are just initial reports. While Netflix is actually in the trenches of original programming, Spotify would have to first prove that it's capable of brokering deals with Hollywood to stream TV shows and movies. But the service has already proven that it knows a thing or two about launching a new product in a competitive market, as it did when it launched in the U.S. in 2011.
Spotify already has your ear. Don't be too surprised if it wants your eyeballs next.