Spotify, the world's biggest subscription streaming music service, has levied its first attack in the online video wars.
The Swedish streaming company said Wednesday that it is adding clips from television shows and other videos to its service that counts 60 million users. Spotify's top executives hope that it will draw more subscribers and take a larger piece of the growing market for streaming content.
There's a tough race in Silicon Valley and beyond to capture the attention of users looking for video on their handheld devices and mobile phones. Beyond just big video juggernauts like YouTube, other tech giants hungry to build their digital video audience include Snapchat, Facebook and Twitter.
At stake is some $1.6 billion that was spent worldwide last year on subscription stream services, which was up 39% from the year before, according to the International Federation of the Phonographic Industry.
“Spotify clearly needs to have a differentiation point,” said music analyst Mark Mulligan, of consulting firm Midia Research. “It needs to prove to the marketplace that it can compete around, as well as compete with, Apple.”
Indeed, industry insiders and analysts expect Apple to enter the fray shortly with a new streaming service following its $3-billion purchase of Beats. There's also competition from rapper and entertainment mogul Jay Z, who recently relaunched the streaming service Tidal that he bought for $56 million.
The move puts Spotify into competition with video companies including YouTube, which have harnessed the allure of short online videos to build a huge audience. The Google-run video service has some 1 billion monthly users, and is also testing its own subscription service.
More than 200 million people in the U.S. will watch digital video on a regular basis this year, according to research firm EMarketer, or about 80% of Internet users.
Mulligan said, to compete, Spotify has to be thought of as more than just a music app.
The company on Wednesday revealed it is licensing videos from the likes of Vice News, Nerdist Industries, and Viacom's Comedy Central and MTV. It has struck deals with video companies that make content for YouTube, like Maker Studios and Fullscreen, as well as traditional players such as NBCUniversal, ESPN and Turner Broadcasting.
Spotify will get clips from shows like NBC's “The Tonight Show Starring Jimmy Fallon,” ABC's “Jimmy Kimmel Live” and Adult Swim's “Rick and Morty.” The service also promises programs made just for Spotify. Amy Poehler's Smart Girls brand is bringing its new short-form series “Dance Move of the Day” to the music streamer.
Video providers have been partnering with digital media companies to reach a younger, digitally savvy demographic that has increasingly turned away from regular, linear television in favor of smaller bites of shows online.
Social messaging app Snapchat has already gotten into the game through partnerships with ESPN, CNN and others. Mega-star actress Sofia Vergara announced in March her new Fusion series would debut on Snapchat. Facebook is boosting its use of video. Last year, the National Football League began posting clips on its Facebook page through a partnership with the social networking giant.
Paul Verna, an analyst at EMarketer, said Spotify's video efforts are a “totally logical” extension of its popular music offering.
“There's always been a very close link between music and all sorts of visual media,” Verna said. “It signals the need for companies that specialize in one type of content to broaden their appeal and keep up with how consumers consume media.”
Spotify's announced a slew of other features to keep listeners on the service around the clock. The added perks include podcasts, news programming and a specialized feature for runners that will detect the users' pace through their phones and provide songs to match the tempo. It also unveiled playlists to fit listeners' particular tastes, moods and the time of day, an element that several streaming services already offer.
The new features launched Wednesday in the U.S., Sweden, Germany and the U.K. for iPhone users. The workout component launched globally.
The company hopes that when people spend more time with the service, they will be more likely to pay up for Spotify's $10-a-month “premium” version, which allows unlimited on-demand access to its extensive library. About 15 million people currently pay for Spotify, while 45 million opt for the free, ad-supported version.
The move into video came with some skepticism from analysts who questioned whether it would be able to effectively take on YouTube and other companies in the space, such as subscription startup Vessel.
“Spotify's identity in our minds is music,” said Manatt Digital Media Chief Executive Peter Csathy, in a blog post. “It is somewhat unnatural for us to shift that perception into Spotify becoming a broader full-fledged media company. But that certainly is not impossible.”
But Spotify CEO and founder Daniel Ek said the non-music content will both “complement and extend” the people's use of the service.
“We believe it will keep users happy and engaged with Spotify throughout the day,” he said. “But also that they will listen to more music as a result.”
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