NEW YORK -- Spotify is changing its tune -- from "listen up" to "look here."
The Sweden-based music service showed off new features Wednesday including video for the first time.
During a demo, Spotify's vice president of design and user experience, showed off a carousel of playlists that will be tailored to particular members, including clips from Vice News, Viacom's Comedy Central and Nerdist News.
Adding video means Spotify will become a service where music fans can listen to millions of songs and watch music-related videos in one place. That could encourage people to spend more time using Spotify and generate more advertising revenue, which could help Spotify keep a tier that's free for you. But it also means that Spotify's format -- a monthly subscription that gives members unlimited access to songs -- will become more complicated, even though this new model remains unfamiliar to mainstream consumers already.
Spotify is the biggest service of its kind by listeners, but it's rapid growth has been matched by ballooning losses -- EUR162 million last year, or more than $180 million. Part of the reason is most of its users remain on its free, ad-supported tier rather than subscribing for $10 a month, which generates more revenue per user. Digital video could make the ad-supported free service more profitable, as it boasts some of the highest ad rates online.
However, Spotify risks complicating itself for mainstream consumers who -- particularly in the US, the world's biggest market for recorded music -- still don't understand what a subscription streaming music service is. The model remains unfamiliar to most people besides those in their teens and 20's.
The move also positions Spotify before the entrance of a big new rival: mobile and computing giant Apple is expected to launch its own subscription service next month. Last year, Apple purchased a streaming service, Beats Music, as part of a $3 billion takeover of its parent, headphone maker Beats. The company is expected to relaunch the subscription service next month at its annual developers conference as a product ingrained in iTunes software and its iOS mobile operating system.
Apple's entrance into subscription music, which it resisted for years, has the potential to harm and help rivals like Spotify. Apple will become an intimidating direct competitor, with a globally recognized brand and an established relationship with music buyers worldwide through its years as the primary purveyor of digital downloads through iTunes. Yet one of the most difficult challenges for upstarts like Spotify has been educating mainstream consumers about what a subscription music service is; Apple launching such a product will go a long way to informing the masses about this model.
In the US, video is the fastest growing online source for digital ad spending. Last year, US digital video ad spending more than doubled on mobile devices and jumped 38 percent on desktop computers, according to researcher eMarketer. By comparison, the biggest category of digital ad spending -- search ads on desktop -- fell 6.9 percent.
Music videos are popular online. The vast majority of YouTube's most-watched videos ever are music, and Vevo -- which hosts both music video and original programming that revolves around music -- racks up 11 billion views every month.
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