Spotify Proposes Alliance with Wireless Carriers

by Matt Klassen on October 25, 2013

How do you solve a problem like “over the top content” companies such as Spotify, companies providing popular streaming online content that tax wireless networks to their limit? It’s a question wireless carriers have struggled with for some time now, not wanting to simply be a “dumb pipe,” supplying users with access to these popular services that make money hand over fist but that give nothing back to the network itself.

While streaming music is but one of many of these so-called “over the top” mobile services that continue to make carriers bristle with discontent, according to Spotify wireless carriers need not fear companies who depend on their networks, and in fact the streaming music service should be seen as an ally, not an enemy.

As Michael Abbatista, Spotify’s global head of telecom partnerships, argued recently, embracing partnerships with such services can actually help carriers, particularly to reduce key turnover stats like churn rate—the number of subscribers who hop from carrier to carrier—helping increase carrier loyalty and brand strength, a win-win situation for both parties.

There’s no question that wireless carriers feel a little used, having to constantly satisfy consumer demand for reliable, powerful, and ubiquitous networks, only to have their services seen as merely a delivery system for YouTube videos, Facebook photos, and Spotify music. Its no wonder carriers often cast derisive looks at such “over the top content.” Such companies make money off the network, yet contribute nothing to its development or maintenance.

But as Abbatista noted, there’s no reason such services and carriers can’t be allies, as a popular service like Spotify can increase customer loyalty, particularly among the younger demographic, as youth tend to not be interested so much in network coverage, reliability, or speed, but instead in the cool services such networks are able to provide. By adding a name like Spotify to a carrier’s service bundle, for instance, could instantly give that carrier increased credibility, and that, of course, means customers stick around longer and pay more money.

Spotify has already created such partnerships with Vodafone in the UK and KPN in the Netherlands, Abbatista explained, and such alliances give Spotify increased marketing and promotion while creating paying customers for carriers.

As CNET writer Stephen Shankland explains, Spotify’s “carrier deals take a variety of forms, the most basic being a ‘soft bundle’ in which carriers simply resell Spotify’s service and customers can pay for it through carrier billing. A fancier ‘hard bundle’ service means Spotify premium subscription rates are part of the monthly mobile fees for higher-end monthly plan. That’s what Spotify likes best, because the paying subscribers tend to keep on paying.”

In the end, looking at the future of both the tech and telecom industries, it seems Spotify is really blazing a trail here, one that might lead to wireless bundles that include more than just unlimited talk, text, and data, but access to premium services like Spotify as well.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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