Netflix has begun to unravel the Gordian knot of Internet distribution and Hollywood content, following a magic realization: In order to negotiate with the folks who own all of the television shows and films, it probably helps to have some desirable video content of its own. After all, you can’t bargain without chips, and if you already own something, you don’t have to bargain for it at all.
Business Insider reports that Spotify is working on a video service along the lines of Netflix, based on information from two unnamed sources. It’s interesting that Spotify might become a video service too, because streaming music and streaming video aren’t worlds apart. In fact, the investors in Rdio, a competitor to Spotify, also run Vdio, which offers movies and television shows for rental or purchase.
One aspect of the report leapt out at us immediately: that Spotify intends not just to stream videos from television networks and Hollywood studios, but also to invest in its own premium programming.
Now that Netflix has made such great strides in owning its own video content — Arrested Development, House of Cards, Lilyhammer, Hemlock Grove, and Orange Is The New Black — it appears that Spotify sees the value of following Netflix’s lead, if this report is to be believed.
So, why would Spotify leapfrog the idea of investing in music — something it already distributes — and go straight to investing in video content, when it has zero track record as a video service? We can think of a couple possibilities:
A. Spotify actually is planning on investing in music too, which would give it exclusive content not available on the other subscription services, lower royalty rates for that music (because it wouldn’t have to pay itself royalties), and give it a little more bargaining power with the labels, at lease when it comes to which music to promote, or
B. Having negotiated with the labels for years, Spotify realizes that it’s simply too much of a headache to sign a few up-and-coming bands (or even try to snag some marquee acts like, say, The Beatles). If it’s going to get into the content game, video would offer more bang for the buck.
If Spotify does intend to add a Netflix-like service, regardless of what it invests in, the company could have a leg up on the competition in one technical sense: The software is capable of reducing bandwidth costs by employing users’ internet connections to send video to other users, sort of the way bit torrent works. In possibly related news, BitTorrent recently announced a live video streaming service (Spotify CEO Daniel Ek was previously the head of µTorrent, a bit torrent client).
It could be worth taking this Business Insider report with a grain of salt. In 2011, when similar rumors swirled, Spotify CEO Daniel Ek issued the following statement: “No it ain’t true. Media these days are funny. Soon I’ll be reading that Spotify is launching a space rocket.”
On the other hand, BI says Spotify declined to comment this time around, so there could be something to this.