Many happy returns to Scandinavian export Spotify, who this year celebrated its 5th birthday; a lifespan marked by more than 24 million active users, of whom 6 million are paying, and the creation of 1 billion playlists worldwide. The last few months, however, have not been without their problems, as the music streaming playing field, already characterized by complicated legal boundaries, became ever more crowded. As well as existing competition from players such as Deezer, Napster and Rdio, Spotify has had to contend with fierce rivalry from beloved brands Apple, YouTube and Beats, not to mention larger digital music services like Google Play, gaming platforms and innovative mobile apps like bloom.fm.
Compounding this unpredictable path, Radiohead front man Thom Yorke publicly accused the brand of "trying to become gatekeepers of music," crushing emerging artists unable to subsist on the insignificant royalties they receive in the process. This furore pushed questions around the degree of responsibility and control a streaming service should have over its content into the limelight; is it an obstacle between musician and audience or rather a facilitator?
What is clear is that the nature of Spotify’s business model has thrown up an interesting business and brand dilemma. Unlike other prominent internet companies such as Twitter, the more users Spotify gets, the more money it has to pay out in royalties. As it looks to grow in this competitive environment, the onus for the universal jukebox is placed on making more money from advertising and subscriptions and trying to stand apart on something other than its literal features. This in turn calls for a strengthening and differentiating of its positioning through the brand.
The music streaming service that prides itself on providing “Music for every moment” has already started to address this. Firstly, it is putting its own crystal clear stamp on what the brand thinks music should be: a collaborative, immersive and curated experience. Its new "Browse" function, for instance, allows Spotify experts to craft playlists for every moment of the day and every mood, whether that be a gym selection or ballads to keep the commute interesting. Arguably, initiatives like this could also allow Spotify to push its support of emerging talent, as better methods for discovering new music start to set the brand apart from competitors’ offers. Spotify becomes a music discovery service rather than a simple radio or playback system.
Secondly, Spotify is realising the power of brands beyond its own to forge out this position as a true music platform. This drive has seen the brand collaborating with luxury player Hugo Boss, for example, who used the streaming service to project its catwalk live from Berlin Fashion Week - a first for the music giant. Spotify is keen to project that working collectively with it allows brands to engage with consumers on a more emotional level, as the music goes some way to embodying a brand’s personality. Beyond representing individual artists, Spotify is looking to host brands and make them just as influential, with obvious mutual benefits.
The third way it's trying to carve out a distinctive niche harnesses this position and propels Spotify into the advisory. In an innovative industry initiative, Spotify is partnering with global music licensing company "Music Dealers" to teach global advertising and commercial partners about the oft-untapped strength of sonic branding. Behaving in this way, Spotify is demonstrating its authority as the go-to in the interplay of music and brand identity and trying to forge out a differentiated point of view.
Music is its undeniable lifeblood, but to ensure a guaranteed prominence a further five years from now, Spotify must continue to add value beyond the playback of song catalogues. A brand can only achieve cut-through in this crowded sector with a clear and distinct point of view. It must further use and develop its brand to create a strengthened position, which allows it to play in unexpected sectors (read high-end fashion), and which places Spotify as the critical pivot between musicians and their public and in the interaction between brands and their consumers.
Julia Bland is an Analyst, Brand Strategy, at Interbrand London.