Spotify, YouTube Killer? Why? And Does It Have a Chance?

Rumors in the digital media world are almost always true.  And, this one is no exception -- Spotify has officially announced that it too is joining the OTT video game -- focusing on short form videos with partners who include ESPN, Vice, NBC and Comedy Central.

Why is Spotify doing this?  And, does it have a chance?

Here are my "quick takes" on those questions:

(1) THE WHY?

Spotify needs to diversify its one-dimensional and thus far unprofitable business model -- pure and simple.  Yes, everyone uses Spotify around the world -- but that doesn't mean that a stand-alone music streaming business is long-term sustainable (at a minimum, the jury is still out -- with Pandora being another prime data point) (I recently wrote about this "Achilles Heel" in my separate post about Apple v. Netflix).  So, the "great hope" is that Spotify can take a significant portion of its reported 15 million paying subs (at $10/month) into the wonderful world of video and monetize that subset effectively and incrementally -- which is the "great hope" for an increasing array of behemoths who look to unseat the reigning champ, YouTube.  These include Netflix and Facebook (most significantly), Snapchat (increasingly interesting), Twitter/Vine, Amazon, Hulu, and Vessel (all of whom ultimately seek to get to the same place -- offering the widest breadth of compelling video content -- both short and long form).

(2) DOES SPOTIFY HAVE A CHANCE?

Interesting question.  Spotify's DNA is music (although it claims to be a tech company first and foremost).  And, Spotify's identity in our minds is music.  It is somewhat unnatural for us to shift that perception into Spotify becoming a broader full-fledged media company.  But, that certainly is not impossible -- and I personally applaud the effort -- because, as discussed above, Spotify must expand its business model to be long-term stand-alone viable.

So far, it isn't exactly clear how Spotify intends to monetize its move into video.  Odds are that it will ultimately offer a "freemium" model akin to its current music service -- with ad-supported video upselling to a paid subscription model for ad-free (and potentially more extensive video offerings only available to paid subs).  And, you can also bet that Spotify will offer both a la carte and bundled subscription packages -- i.e., one higher monthly price for both Spotify music and video, and separate lower-priced monthly fees for music or video only.

Then there is the issue of video monetization that all OTT services struggle with.  Thus far, stand-alone video services (both on the OTT and MCN side of the house) -- with the exception of YouTube and Netflix perhaps -- have been profit-challenged (just like their stand-alone music brethren).  BUT, we are still in the early innings of this overall fundamental media/video transformation fueled by millennial-driven mobile consumption, so we are in business model experimentation mode.  And, you gotta try.  Otherwise, you may be just plain "out" of the game in the long-run.

That's what Spotify is doing.  And, it certainly has a massive global audience that has demonstrated that it is willing to pay.  So, I applaud the effort.

(NOTE -- video creators, rejoice! -- more significant competition for your compelling work in this New Golden Age of Content).