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Report: Spotify set to enter streaming video space

Sources say company set to become on-demand music and video service
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The streaming video business is to calling Spotify and, according to sources speaking with Business Insider, the commercial music streaming service is listening.

Spotify declined to comment on the story, which said it is looking for partners to fund and create exclusive content that would compete with content providers like HBO and, more recently, Netflix (Nasdaq: NFLX) and even more recently Amazon Prime (Nasdaq: AMZN), all of which have used creating and owning content as a way to enhance the value of their services.

Spotify, the story theorized, may have learned a lesson from its music service, where popularity with consumers has not necessarily translated into business success because the company does not own the music it plays; rather, record labels do, and they make Spotify pay each time a customer listens to a song.

"The original plan for Spotify was that it would grow so popular with music listeners that Spotify would be able to dictate negotiations with the labels," the story said. It hasn't happened, thanks to multiple competitors in the space, and thus, "[e]ven though it has become a significant source of revenue for the labels, Spotify still depends on the labels more than they depend on it."

Video has a similar track record, harking all the way back to when HBO was strictly a movie channel with some light side content such as comic specials. Today, the network is about as well known for its original content, ranging from the unparalleled drama "The Wire" to today's "Game of Thrones." Original content, not movies, is what keeps subscribers plugged into HBO.

Netflix, too, is trying to move from a movie rental model, going from hard-copy DVDs to online and now original programming with "House of Cards" and the upcoming, highly anticipated "Arrested Development." And Amazon, of late, has put together programming packages that rival what's currently available on pay TV services.

It all goes back to HBO, though, as the innovator in the original content space. HBO, the story said, has paid "huge sums of money to create" its original programming but those programs "attract subscribers who stay subscribers... Netflix and Spotify are betting that they can pull off a similar trick as the distinction between Internet-based video and cable TV blurs."

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