Instant Alert: Spotify considers flagship smartphones and smart speakers from Amazon, Apple, and Google a threat to its business

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Spotify considers flagship smartphones and smart speakers from Amazon, Apple, and Google a threat to its business

by Avery Hartmans on Feb 28, 2018, 4:00 PM

Music streaming service Spotify outlined its main sources of competition in paperwork for a direct public offering filed Wednesday.
Spotify is worried about the added visibility given to rival music services in hardware that comes pre-loaded with other music apps, which would include devices like the iPhone, Google Pixel, Amazon Echo, Apple HomePod, and Google Home.
"Apple, Amazon, and Google, have developed, and are continuing to develop, devices for which their music streaming service is preloaded, creating a visibility advantage," the filing says.

Spotify considers outside devices that come pre-loaded with rival music services threats to its bottom line, which would include everything from smartphones, like the iPhone and Google Pixel, to smart speakers, like the Amazon Echo and Apple's new HomePod.

The Swedish music streaming service filed paperwork for a direct public offering on Wednesday, a process where Spotify offers its shares directly to potential investors, bypassing the typical Wall Street process of taking a company public.

The F-1 prospectus Spotify filed for the offering contains some revealing tidbits about what Spotify has historically viewed as its competition — namely, other types of streaming services, entertainment apps and programs, and anything that competes for user attention.

But in recent years, there's a new sector of the business that could be threatening Spotify's music streaming stronghold: smart speakers and flagship smartphones that come with a different streaming service pre-installed.

"Many of our competitors enjoy competitive advantages such as greater name recognition, legacy operating histories, and larger marketing budgets, as well as greater financial, technical, human, and other resources," Spotify wrote in the filing.

"In addition, some of our competitors, including Apple, Amazon, and Google, have developed, and are continuing to develop, devices for which their music streaming service is preloaded, creating a visibility advantage," the document reads.

Beaten to the punch

HomePod Spotify has reportedly considered developing its own hardware in the past.

According to job listings first spotted back in April, Spotify was looking for candidates to build "a category defining product akin to Pebble Watch, Amazon Echo, and Snap Spectacles."

But Spotify hasn't released anything yet, and in the meantime, Google, Apple, and Amazon all have their own versions of a smart speaker, all of which are tailored to the company's own music streaming service:

Google Home — which includes the Google Home Max, a powerful speaker aimed at music aficionados — will play music from Spotify, but also plays YouTube Music, Google Play Music, and Pandora.
Amazon Echo works with Spotify, and much like Google Home, is a more open ecosystem — for example it allows users to set Spotify as the default mode of playback for song requests. The Echo also supports Amazon Music and Pandora.
Apple HomePod, which was released last month, can stream Spotify, but is designed for Apple Music — the speaker's "smarts" and voice controls won't work with any other streaming service.

A smart speaker would differentiate Spotify in the crowded field of music streaming services. At this point, many of the premium on-demand streaming services are viewed as interchangeable by consumers — they all come in at a similar price point of $9.99 and offer similar catalogs of millions of songs.

Spotify's concern over its competitors' "visibility advantage" also applies to smartphones like the iPhone and Google Pixel, which come pre-loaded with Apple Music and Play Music respectively.

While Spotify has tried to set itself apart in other ways — like its popular "Discover Weekly" playlists, which use algorithms to suggest music you'll like — its lack of hardware and the preloaded music apps on popular smartphones are clearly points of concern as the company prepares to go public.