Since the recent rise in popularity of Spotify, I’ve had a few discussions with people regarding the business models it uses. I’ll assume you’re familiar with how it’s advertising and charging model works; get the service for free and get ads, or pay a monthly premium and receive the service ad free.

It’s an interesting approach, and one of the first major media services (that I know of) that allows it users to pay more and get the service ad free. Some websites also offer this option but not many. And those that charge for content through paywalls typically still feature advertising, albeit of a lesser degree.

Personally, I think it’s a great idea and hope that it will shape the future for many other paid services – though I have some doubts about whether it will benefit advertising.

TV subscription services such as Sky and Virgin charge for content in the same way, but their services feature advertising as well – you pay a premium for the service, and are still advertised to.  With the rise of the Spotify model, I know more than a few people who are becoming annoyed with that TV model – it’s almost creating a mindset for subscription services of “I’m paying for a service, why should I have to receive advertising too?”

Radio works in the same way, but is always free.  I’m sure  if they were to introduce a subscription service, you’d expect it to be ad free.  Cinema? You pay for your ticket but still get 30+ minutes of ads before a film, fair?

And the BBC, well they just charge anyone that has the potential to view the service as they maybe viewing it, and can function advertising free. Not a particularly fair model, but I’ll come onto that in some later discussions.

I think the Spotify model works great, and on tv subscription services could work well, it could almost be the future of content delivery.  I don’t however think it will be able to be delivered (at least not in the close future) – simply due to the technology that will be required and the cost.  With Sky requiring you to pay a premium and them receiving revenue from advertising to make their business profitable, I’d imagine they’d need quite a high subscription charge to make an ad free model affordable.  Upwards of £100 a month? Who knows.

Either way, I think the Spotify model is great and a subscription model that I hope a lot of other media providers consider.  Pay a subsciption, get the service ad free.  I also think a lot of people, particularly on what’s considered ‘over-advertisied’ services such as Sky, would take it up.

I don’t think it’s particularly beneficial for advertisers though, as it reduces their audience size and the amount of advertising people are exposed to.

You could argue if we make advertising more targeted and exposure people to less in general, then we’ll see it perform better, and I think that’s the key.

Less frequency, more relevancy.