Wednesday, November 14, 2012

Spotify and the successful failure of the long tail

To me, nothing exemplifies the potential and shortcomings of the "long tail" approach as well as Spotify. For the uninitiated, Spotify is a streaming music service that lets you listen to a massive library of music (legally) over the Internet whenever you want. It has a free version (which is ad-supported) and several tiers of paid editions (which allow mobile access, offline access, and other features).

For me as a music consumer, Spotify has been a long-tail paradise. Over the past year and a half, I've used it to explore all kinds of genres and sub-genres of music -- many of them obscure records or album tracks that I'd never hear on the radio and probably wouldn't find at most record stores, either. I've done a ton of Spotify listening, and almost all of it has been deep in the long tail. It's all listening that simply wouldn't have been possible 20 years ago, at least not without thousands of dollars to buy and try out all of those albums.

But for the media companies themselves, my long-tail indulgence has been almost worthless in monetary terms. Spotify pays labels per listen, which in turn distribute that money to their artists per listen as well. According to this article, each of my plays of a song on Spotify Free is making the artist somewhere between 1 cent and 1/10 of 1 cent. Don't spend it all in one place, guys! I could listen to thousands of songs (and I have), and it would still only add up to a few dozen bucks collectively for all of those artists.

But that just means Spotify is making a bunch of money off me instead, right? Wrong. Since I'm not willing to pony up for a monthly fee (I don't have a smartphone and my laptop is always connected to the web, so mobile and offline access don't mean much to me), Spotify has actually been losing money on me.

So whose perspective do we take on the long tail? For me as a consumer, it's been an amazing development. But as a business model, at least in my case, it's worthless. There are surely other, better ways to make money off the long tail (even Spotify's subscriber services are making gobs of money), so this isn't necessarily an indictment of the long tail as a whole. But it's one data point suggesting that it's quite a bit more difficult to make money off the long tail as Chris Anderson makes it sound.

6 comments:

  1. But Anderson also believes in the "1% rule" -- 1% of the users who are willing to pay can support the free service for the rest 99% of users.

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  2. Apparently the 1% rule is idealistic according to this article:
    Pandora and Spotify Rake In the Money and Then Send It Off in Royalties
    http://mediadecoder.blogs.nytimes.com/2012/08/24/pandora-and-spotify-rake-in-the-money-and-then-send-it-off-in-royalties/

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