Spotify always aimed to become the soundtrack to your entire life -- it just realized it needs more than music to get there.
Wednesday, the world's biggest subscription music service unveiled the addition of video clips, podcasts and news to its catalog of millions of songs available on demand. That may strike an odd note, but the reasoning is smart: Seven out of 10 Spotify listeners also watch YouTube, but the majority of people viewing music on Google's video site don't use Spotify, according to researcher MusicWatch. Meanwhile, half of Spotify's users turn to traditional AM/FM radio for news, talk and sports.
Spotify wants to keep you locked into its service by morphing into a one-stop media shop. It's seemingly an easy fix: If users are popping out of Spotify to watch a video or catch a headline, then include those elements so they don't leave. If mainstream consumers aren't obsessed about music enough to justify paying $10 a month, offer more than just tunes. In other words, give the people what they want.
But there's a catch: While Spotify wants to give you everything, you have specific needs -- everything else is just noise that threatens to overwhelm would-be new members and alienate current users who turn to it for tunes. That's why Spotify's other announcement Wednesday -- enhancing its contextual playlists that anticipate the type of content you want to hear or watch -- was just as important to its long-term success. Unfortunately, reading minds is hard to do.
Spotify is walking a tightrope, Dan Cryan, analyst at researcher IHS, said. "On one hand, you're going mass-market by giving consumers more options. But if you make the core product harder to use, then you actually begin to remove the reason why a lot of your users are there in the first place."
Context is king
Wednesday, Spotify said it would introduce more predictive contextual playlists for users. These anticipate the music people want to hear at a given moment in a specific situation, for example, while getting ready for dinner or commuting to work.
Spotify highlighted how much it already knows about its members' habits. With more than 25 billion hours of music streamed since it launched seven years ago, Spotify has lots of data about what people are using throughout the day, noted Rochelle King, Spotify's vice president of design and user experience. It starts with location and demographic information, she said, and is supplemented by music editors around the globe who know what is going on in their areas.
And last year, it purchased music intelligence company Echo Nest to help it put that data to keener use.
But predictive contextual playlists are more complicated when other media are added to the mix. Especially with new users who haven't built up a behavioral track record, Spotify needs to know what suggestions generally fare well in different settings, and that is much more challenging as it introduces comedy videos, sports clips, news briefs and talk radio as part of a user's daily soundtrack too.
Fundamentally, Spotify has always been tracking music behavior, said Bryce Clemmer, whose company Vadio helps add video to music-streaming services. The introduction of other kinds of media means Spotify will need to understand how often and at what times people want to expand what they're doing beyond music, he said.
"Because we're human and all of us are screwed up with no set schedule, you can't really do that," he said. "You can try to write algorithms and machine learning processes that can as close as possible determine how we generally feel on a day. But overall, it is very challenging."
If anybody's Spotify usage can illustrate how the service is capable of learning individual tastes, it would be Daniel Ek's. He is the co-founder and chief executive of the Sweden-based company, with a long listening history to match.
"It's a personalized experience," he said in an interview at the sidelines of its event on Wednesday. "My Spotify, for instance, on Sundays has learned that I like to listen to new music. Maybe you won't watch the comedy clip, but we will learn that, and we will take it away from you if it's in the way."
But for Spotify to to be sustainable as a business, it needs to attract new members in the mainstream and persuade more of them to pay -- not just get better about understanding the ones it has. Spotify has grown into the biggest service of its kind with 60 million active users and 15 million of them paying members, but its losses have swelled as well: 162 million euros last year, or more than $180 million.
Spotify makes money two ways: revenue from advertising played for people who listen free and $10-a-month subscriptions for those who want extra benefits without the ads. The subscriptions are much more lucrative than the advertising, but the free tier is by far the most popular.
"There's no question that the vast majority of people still haven't connected with the reasons to pay for subscription," said Russ Crupnick, analyst and managing partner of MusicWatch.
Spotify describes its core user as somebody passionate about music or an early adopter of technology, but its goal is to be in the hands of everybody who owns a smartphone. That means it needs mass appeal.
"With a much broader spectrum of content, it has the potential to touch more lives," said Peter Csathy, chief executive of consulting firm Manatt Digital Media. Though streaming music is still new as a model, it doesn't have many examples of profitability as a pure play, he said. "If Spotify can create that recipe, if it strikes the right balance, then it will draw people into the fold."
Striking that balance, for Spotify, means having a little bit of country, a little bit of rock'n'roll and a whole lot of soothsaying.