Tuesday, March 26, 2013

Spotify Planning Streaming Video Service

According to two sources briefed on the company's plans, Spotify intends to become an on-demand music and video service – one that would invest in original content and compete heads-on with Netflix.

Ultimately, according to Business Insider, Spotify's metamorphosis would also put it into competition with content creators and providers such as HBO.

Our sources said that Spotify is looking for partners that can help it fund and create exclusive content. It is unclear if these talks would lead to a new round of investment in Spotify itself.

Spotify is already worth billions of dollars on paper thanks to several huge rounds of investment – the last of which we started hearing about this time last year and later closed in the fall. The $100 million investment from Coca-Cola and Goldman Sachs valued Spotify at $3 billion.

Spotify has become a very popular service with consumers, but its business remains challenged. The reason: extremely thin margins. Spotify does not own the music its customers listen to. Music labels do, and Spotify has to pay the labels every time a customer listens to one of their songs. As Spotify gets more popular, the labels charge more and more.

The original plan for Spotify was that it would grow so popular with music listeners that Spotify would be able to dictate negotiations with the labels.

This hasn't happened.

Spotify plans on Monday to start its first campaign aimed at American music lovers. Appropriately, the initial commercial in the campaign is to make its debut on a music reality competition series, “The Voice,” which is returning on Monday night on NBC for its fourth season.

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