Dear Spotify,
We know that you are one of the most exciting companies of the moment. Everyone, from the Guardian, to Techcrunch and e-consultancy is singing your praises. In spite of all the hype, we actually believe that Spotify remains under-hyped.
It’s about more than your business model
Mainstream media interest in Spotify has focussed on your business model. The music industry has of course been badly hit by the growth of the internet, the rise in piracy and the shift in consumer spend to video games. As a result, almost all of the coverage has narrowly focused on this question of whether you can make the music industry profitable, and whether you can be profitable yourself. People have, shockingly, compared Spotify to We7, shocking because We7’s sole purpose is to deliver ad supported music to consumers for free, and the Spotify proposition offers a whole lot more.
It’s about a whole new way of consuming music
It is tempting, given Spotify’s iTunes-like interface, to think of it as just another music delivery mechanism, one that’s preferable to downloads because it is easier to protect against piracy. But that misses the point. Streaming music allows you to potentially offer your users two new types of listening experiences, without parallel in competitor services. One of these has already been launched, and I hope that we don’t have to wait long for the second:
1. Transform my mobile phone into the ultimate MP3 player
Spotify’s premium service for iPhone, Android and Symbian is incredible. I have access to (almost) any song, at any time, immediately. It doesn’t matter that my iPhone has only 8Gb. I have instant access to an enormous music catalogue, unparalleled by even the biggest private collections.
2. Social consumption of music
Spotify has barely scratched the surface of the social features they could build around their product. Sharing playlists is just the beginning. I want to be able to discuss tracks with other music enthusiasts as I listen to them (and we listen to them together, in real-time), lookup forthcoming gigs, browse other people’s libraries for new music, send tracks to friends, even potentially talk to the artist while we’re both online.
How does Spotify seize these opportunities?
Given the potential, it’s a little disappointing how quickly you are progressing with your music revolution. Some recommendations:
1. Start properly marketing / advertising the services you already offer
Your mobile phone app is nothing short of incredible. It has serious mainstream appeal. You should be all over mainstream media telling people: “we can turn your phone into the ultimate MP3 player” Don’t get stuck, as Skype did, trying to monetise your cost conscious, tech-savvy early adopters, but rather start advertising directly to the thousands of people who would kill to have a limitless library of music in their pockets.
2. Develop social features – quick!
A flippant thing remark, perhaps, but it needs saying. Those social features aren’t “nice to haves” – they’re key in differentiating the Spotify proposition from everything that’s gone before it. And that’s important because music piracy means by and large people are much less willing to pay for just the vanilla experience of listening to individual tracks. However they may well, for example, be willing to browse and listen to their favourite artist’s music collection – be that Rev Run or Paul McCartney. Especially if they can do so with their friends, compare notes, and rate it. And imagine if they could do it with the artist him/herself?
There are several challenges to developing the social features quickly. One option you might want to consider is opening up your platform. Your core audio streaming system is brilliant – why not follow the path of Facebook or Twitter and nurture an imaginative developer community to build a wealth of different apps to take advantage of that core technology?
And if it all sounds like a bit much? Hire Keplar LLP 
