It is official: Music-streaming service Spotify has signed a strategic partnership with Coca-Cola. Spotify will provide a brand app for the beverage giant inside the Spotify desktop app, alongside brand apps for AT&T, McDonelds, Intel and Reebok. In return, Coca-Cola will feature Spotify as the centerpiece of its "Year of Music" campaign in 2013.
The announcement broke on Ad Age, which reported from its Ad Age Digital Conference. Spotify CEO Daniel Ek addressed the conference this morning (April 18) at the conference, where he told the crowd "We want music to be like water, everywhere. But when you think about it, we want music to be like Coke, which really is everywhere."
Spotify is now available in the U.S. and Europe, with about 10 million non-subscribing users and 3 million subscribers. Spotify is attempting to extend its global reach, which it plans to do by piggybacking on the Coca-Cola brand.
This is a good deal for Spotify, which has come under media scrutiny. As CNET’s Greg Sandoval described, “Critics argue that the royalty rates the company pays are too high for it to ever eke out a profit for any significant length of time.” Despite the IPO rumors of late, a company that has yet to turn a profit after five years “in a very risky digital market, is a long way from being a good investment.”
Neither Spotify nor Coca-Cola released details of the arrangement, but it does not appear any cash will change hands; not so for Intel, Reebok and McDonald’s. Ad Age speculates that the brand apps and Coke partnership “demonstrate Spotify's commitment to adland…to help underwrite the substantial costs of licensing music from record labels.” The brand apps are free to develop, but Intel among others have committed to paid advertising on Spotify.
Short term, Coca-Cola will integrate Spotify into its Facebook timeline, where it will be visible to the Coca-Cola’s more than 40 million followers. (Spotify is integrated into Facebook, after the companies signed a partnership in September.)