Spotify gets a leg-up in Germany from Deutsche Telekom bundling

Carrier bundling is the holy grail of deals being sought by all the competing music subscription services. Now Spotify has inked its twelfth such deal.

This is a great deal for Spotify, which launched in Germany early in 2012. Customers will be billed through their Deutsche Telekom subscriptions. That will reduce Spotify’s friction and ease its customer acquisition.

It is also a good deal for Deutsche Telekom; mobile carriers need to differentiate themselves and offer services beyond just basic connectivity nowadays.

The impact

Spotify had identified carrier deals early on as the thing which could really make its business tick. It now has various kinds of bundle deals with Virgin Media (UK), Three (UK), Telia (Denmark, Norway and Sweden), SFR (France), KPN (Netherlands) and Yoigo (Spain).

In Sweden, 25 percent of Spotify Premium customers come via Telia, with which it did its first bundle deal to include TV, mobile and fixed-line. That kind of impact could boost Spotify’s fortunes in Germany, where O2 and Kabel Deutschland already offer local music rival Simfy.

But the impact for Deutsche Telekom is less certain. In a new report, Informa Telecoms & Media analyst Giles Cottle posits that Spotify has been more instrumental in helping Telia upsell smartphones and data plans to existing customers than in helping it poach customers from rival carriers.

Since striking the deal, Telia’s mobile services revenue has increased but its share of the market has remained static, Cottle points out.

Future of music

Ovum analyst Mark Little says bundling deals will be one of the major factors pushing the emerging unlimited-music subscription segment to 46 percent annual revenue growth, reaching $22.5 billion by 2017 (forecast, via release).

That will help boost global digital music revenue by 15 percent annually, says Little, adding: “Telcos are helping to drive subscription growth with mobile music bundles, leading to significant growth in South & central America, for example, with over 50 percent CAGR.”

What would boost Spotify significantly more is finding a carriage partner in the U.S. or, later, in China.

Meanwhile, rival Deezer has announced its service will be an integrated feature of Philips’ new Fidelio internet radio range.