Industry Focus - What is the true value of Spotify?

Music streaming site Spotify was last week valued at almost £190m by the Trade Register of Luxembourg despite an ongoing struggle to attract premium subscribers and a delayed launch in the US.

The figure of 230m Euros (£188m) is a significant increase from the valuation of 190m Euros estimated last year, reflecting the level of ongoing investment raised for the platform.

Documents obtained by Computer Sweden, as reported by Music Week also reveal that Napster co-founder Sean Parker invested £9.6m in Spotify in February this year, taking a 5% stake in the company and a seat on the Board of Directors.

Despite high profile global popularity since its launch in October 2008, Spotify has so far failed to prove that a majority of users are willing to pay for enhanced and advert free versions of the online jukebox style service.

Founder Daniel Ek admitted in September 2009 that less than 10% of its users had jumped to the premium subscriber model, paying £10 a month for higher quality streaming and no ads. The service reached over 1m users in the UK alone last year, with users gaining access to over 8 million tracks.

The streaming service has diversified and produced a successful mobile app for Android and iphone devices, alongside integrating with Last.fm and creating social features linking to social networking sites.

However, the service has also received criticism for not remunerating artists properly, with Swedish Sony artist Magnus Uggla famously stating on his blog last year that, following 6 months of streaming tracks on Spotify he had earned “What a mediocre busker could earn in a day”.

Major pop artists such as Bob Dylan, The Beatles, Oasis and Arcade Fire are not featured on the service and Spotify’s treatment of artists on independent labels has been called into question.

Last week, it was announced that the Senior Vice President of Strategic Partnerships Paul Brown had left the company. Furthermore, Spotify is yet to launch in the US, although staff have announced that they expect the service to go live in this territory before the end of the year.

Generate debate: Sooner or later the question must be asked- what is the true value of Spotify? Is it sustainable and viable as a long-term business model? Can Spotify effectively ‘monetize’ music streaming beyond advertising revenue and can it successfully remunerate artists? What does it all mean for the future of digital music consumption? Is everyone’s favourite streaming site in trouble?