Spotify Gets Behind the Wheel

One of the biggest winners of last week's launch of Spotify in the United States was General Motors (NYSE: GM  ) .

GM's Chevrolet signed up to be one of Spotify's first advertisers, in a layered marketing deal to promote Chevy's Sonic, a new entry-level subcompact that the automaker plans to roll out later this year.

For starters, the mad scramble for Spotify invitations attracted online music buffs to Sonic's Facebook page. The first 150,000 requests received through the Chevrolet Sonic tab on the Chevrolet Facebook page were promised access to Europe's popular digital-music service.

Things didn't go smoothly. A lot of registrants complained about not receiving invitations, and initially, Chevy mistakenly offered six months of premium Spotify access -- the highest tier that offers ad-free streams on mobile devices and more for $9.99 a month. GM and Spotify are doing the right thing by honoring those early requests.

Either way, more young music fans know about Chevy's new subcompact, which will retail for as little as $13,735, than they did earlier this month -- blunders and all.

The next phase of the partnership should be integration. After all, if Chevrolet is onboard as the exclusive automaker advertising partner, why wouldn't Spotify eventually work its way into the Sonic's dashboard technology? There's nothing official on that front, but folks are already starting to speculate out loud on that front.

Woe is Pandora Media (NYSE: P  ) and Sirius XM Radio (Nasdaq: SIRI  ) , right? Not so fast.

I've kicked the tires on Spotify enough to know that it's superior to most of the music services out there, but it's not in the same league when it comes to value proposition of Pandora or the in-car accessibility of satellite radio.

The reason Pandora has been prominently incorporated into Toyota's (NYSE: TM  ) Entune multimedia system, as well as into the workings of other forward-thinking car manufacturers, is that it's a free, ad-supported mobile streaming service. There is a premium service available, but it's still largely consumed as a free smartphone app. There is no free mobile streaming of Spotify. Even the mid-tier $4.99 monthly plan doesn't include the smartphone access that is necessary to stream music on the go through a Bluetooth-enabled auto-entertainment system. Spotify customers need to pay $10 a month for access to the 15 million songs along with the shared playlists that can incorporate personal MP3 collections.

The cover charge is less than what Sirius XM charges, but one also has to rely on iffy wireless-carrier connectivity. AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) also no longer offer unlimited data plans to new customers, so those smartphone owners may be reluctant to stream through metered plans. Even if audio streams aren't the data hogs that video and traditional Internet surfing can be, that will be a deal breaker for some. Unless Spotify plans to either offer Chevy owners free premium access or will strike revenue-sharing deals the way Sirius XM has with automakers over the years, it will be a long uphill road for Spotify to enter the dashboard conversation.  

Is Spotify a threat to Pandora or Sirius XM? Share your thoughts in the comments box below.

Motley Fool newsletter services have recommended buying shares of AT&T and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz was impressed by the breadth of Spotify's content but thinks its premium pricing will get in the way. He owns none of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


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