As it battles to monetize and differentiate itself in the growing world of streaming music, Spotify is using Canada as a testing ground for local advertising, positioning itself as a complement to terrestrial radio.
On the heels of a similar European survey, on Wednesday the Swedish streaming service released results from a survey of 1,011 Internet users from the Toronto area from ages 15 to 65. It found Spotify had a broader reach on a weekly basis than all but four of the Greater Toronto Area's major terrestrial radio stations.
The company plans to use the results to lure more advertising for Spotify's free tier, helping drive revenue for the company in a sector that rarely sees profit.
Canada is "one of the fastest-growing markets at the company," said Les Hollander, Spotify's global head of audio monetization, in a phone interview. The country, he said, is a "nascent market" for Internet streaming advertising, making it ripe for the picking.
Streaming is an inherently measurable way to consume music. Spotify already heavily leans on user data to customize their listening experience. Now, it's trying to leverage data to effectively deliver listeners ads. "We're not talking about if we're bigger or better" than terrestrial radio, Mr. Hollander said, "but we're an audience you can reach with your radio buy."
The service's paid $10-a-month subscription tier has more than 20 million users worldwide – company representatives declined to comment on speculation they're approaching 30 million – and does not feature advertising. But the ad-supported free tier has a much higher reach, with more than 75 million global users; targeted ads are a wide-open opportunity for the service to draw greater revenue from these users.
Its toughest competition in the streaming world is arguably Apple, whose vice-president Eddy Cue said last week now has 11 million streaming users on its new Music app, and whose other lines of business can keep its music verticals afloat.
Spotify, like all stand-alone streaming services, does not have such luxury. And it faces increasing competition, including from rapper Jay Z's Tidal, which in just the past few weeks has offered exclusive releases from Beyoncé, Rihanna and Kanye West, some of the world's biggest artists.
According to the survey, however, Spotify has the greatest reach of major streaming services in the GTA, with 16.8 per cent of Internet users of ages 15 to 65 using the free tier, versus 10.5 per cent for Apple Music. (It found separate numbers for Google Play Music and Songza, which have since consolidated, throwing a wrench into the data.)
When asked if the survey meant that Spotify was refocusing its efforts on the free tier, spokesman Graham James insisted that "it's all one ecosystem," and that the data collection simply gives "advertisers and marketers the tools to make great decisions."
The Toronto survey, done with the research firm TNS Global, is Spotify's first in North America. More Canadian cities will be surveyed later in the year. It is not the first streaming music company that has turned to Canada as an early market for local advertising. Rdio, which filed for bankruptcy late last year and was sold to Pandora Media for parts, partnered with Shaw in 2014 to increase its presence in local Canadian markets.
Whereas most people surveyed primarily listened to terrestrial radio while in the car, peaking during morning-commute hours, TNS and Spotify found that people stream increasingly more throughout the day until about 10 p.m.
The survey also revealed which radio-station audiences, and in turn potential advertisers, align with Spotify's audience. Listeners who tuned in to rock and classical-music stations had less overlap with Spotify's free-tier users than pop-oriented stations such as 104.5 CHUM FM and 99.9 Virgin Radio.
Spotify came to Canada in late 2014. The survey, conducted through a series of standardized questionnaires last December, found that 63 per cent of respondents knew about the service, with awareness skewing lower with age: 84 per cent of 15-to-24-year-olds knew of it, compared with 38 per cent of people 55 or older.
Money is a lingering problem in many ways for streaming companies such as Spotify. In December, U.S. musicians-rights advocate David Lowery filed a $150-million (U.S.) class-action lawsuit against the company, alleging it did not properly license some of its music in the country, preventing artists from being properly compensated. Spotify filed a response in a California court last week asking the court to strike the case. The company declined to comment on the issue.