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Cable Technology Feature Article

April 02, 2013

Spotify to Launch Streaming Video Service?

By David Delony, Contributing Writer

Spotify (News - Alert) has become a must-have application as it offers a large, legal streaming library of music, but the company is trying to compete with Netflix, Hulu and cable companies by launching its own streaming video service.

Spotify currently has almost all the history of recorded music for free – at least, if listeners don’t mind the absence of major acts like The Beatles or Led Zeppelin. Listeners can also pay for premium tiers that eliminate commercials and allow them to stream on mobile devices.

Goldman Sachs values the company at approximately $3 billion, and Spotify has attracted the investment of $100 from the Coca-Cola Company.

As popular as the service is, the company remains at the mercy of the record labels. The costs of licensing the music eat up much of the Swedish company’s profits – a problem Pandora (News - Alert) also faces. Instead of paying for blanket licenses the way terrestrial radio stations do, they must pay for each song a customer streams.

Spotify has attempted to renegotiate with the major labels, but efforts have failed to bear fruit. Music fans can choose other streaming and download services, putting Spotify at a disadvantage.

“A year ago, Netflix was dealing with a similar challenge – just in video instead of music,” Nicholas Carlson wrote in Business Insider. “Netflix did not own any of the content it streamed, and the Hollywood studios that did own the content were able to charge Netflix huge, margin-thinning amounts of money.”

That’s why Netflix has turned in part to original content, with the drama “House of Cards” and by bringing back the cult comedy show “Arrested Development” for another season. Although producing a TV show isn’t cheap, Netflix at least owns the content. Exclusive content also attracts subscribers.

There is yet no word on when the streaming video service might launch or what content would be initially available to viewers.

Edited by Braden Becker

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