An American Lion

Spotify

I’m not really convinced this is the new Napster, but it is worth thinking about:

A tidal wave is washing over Europe, and it has already begun to transform the digital music landscape overseas. In the next few months, the company expects to make its way to the U.S.

Spotify is a program similar to iTunes that lets users listen to just about any song on demand. For free. The application takes a page from the Google model — give a fantastic product away and plan to make money from ads.

It also has a “freemium” component — that is a business model where the cow and milk are free, but the bells and hormones cost extra.

In order to play music on smart phones (including a spiffy iPhone app) or store songs to be played without an Internet connection, users must subscribe to Spotify Premium, a 10-euro-per-month plan. Each subscriber can sync three devices with up to 3,333 songs.

But Spotify has said in prior interviews that it expects the majority of users to stick with the free version. For that reason, U.S. record labels are skeptical, according to a recent story in the Financial Times. Subscription services such as Napster and Rhapsody have failed to attract significant followings.

Someone, somewhere, will figure out how to ruin something like this. I don’t think it makes enough money for the artists and the record labels, and I don’t think it takes into account that their current business model—find a bland artist, have them make one album ever three years, charge $18 for that album, and ignore the advent of new technology—hasn’t budged really. New artists, or existing acts that have walked away from the record labels, will overwhelm the old business model when someone comes up with something that will break through.

Think of what would have happened in 1991 if Nirvana had been a truly independent band with no major label and had sold their albums to people without a middleman so that they could pocket the money. If Nirvana had come out a dozen years later, had had a website, and had said, here’s our album, go ahead and download it once you PayPal us five dollars, they would have destroyed the record labels. Everyone would have scrambled to make that their new business model, and many smart artists are already trying to figure out how to survive online without a label.

Spotify just kicks the can down the road, and someone is waiting around the bend to take the can away.