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Sam Altman’s bet against Slack

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week Kate and Alex broke the discussion into two main themes. The first dealt with early-stage companies, and the second, as you can imagine, later-stage affairs. Don’t worry, we don’t get to SoftBank for quite some time.

Up top, we dug into Kate’s story about Quill, a formerly stealthy company that could be taking on Slack. That or something similar to Slack . Next, we turned to ManiMe, a startup in the beauty space that raised a smaller $2.6 million round to take on a market that is valued in the billions.

After that it was time to leave the auspices of the early-stage market and move to, of all things, a public company. Grubhub reported earnings this week. It went poorly. Alex wanted to riff over the company’s earnings report and what it could mean for startups that are competing with Grubhub, a leader in the food delivery space that DoorDash and Postmates would prefer to lead themselves.

What impact Grubhub may have on the highly valued on-demand companies isn’t clear yet, but will be pretty damn interesting to see when it does land.

Sticking to the later-stage markets, Alex dug into the problems at Wag, which is struggling and looking for a sale despite raising a castle of cash from the Vision Fund. Kate followed that up with notes on problems at Katerra. The Information is reporting this week that the business is going through a number of layoffs, and we’re wondering if it will suffer the same fate of some of SoftBank’s other investments.

And, finally, the changing face of things at SoftBank itself. The great money spigot is slowly cutting flow. How many unicorns that will strand isn’t yet clear. But surely it can’t be zero.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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Spotify launches a dedicated Kids app for Premium Family subscribers

In a move to boost family subscriptions to its app, Spotify this morning announced the launch of a dedicated Kids application which allows children three and up to listen to their own music, both online and offline, as well as explore playlists and recommendations picked by experts, and more. The music selection is also filtered so songs won’t have explicit content.

The launch is a first in the online music streaming space, where kids on parents’ music plans typically sign in through the same app — just with a different login. But Spotify believes children deserve their own space, where the music they listen to is available in an ad-free environment, where they won’t accidentally encounter lyrics that parents disapprove of, and where content is hand-curated by editors.

Spotify Kids, essentially, is a set of hand-picked playlists across categories.

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The app includes categories like Movies & TV, top hits, Activities (bedtime, homework, playtime, etc.), genres, seasonal, Spotify Originals, artist/groups, and Stories.

The playlists are all programmed by human editors, not algorithms, and are chosen by way of a set of guidelines about what’s appropriate for children.

The editors, Spotify says, have backgrounds from some of the most well-known brands in the children’s entertainment business, including Nickelodeon, Disney, Discovery Kids, Universal Pictures, Public Service (Sweden), and BookBeat (a family and kids-oriented audio streaming service).

The new app isn’t just for the preschool set. Instead, it can grow with the kids as they get older — but still aren’t ready for the parents’ application yet.

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In the younger kids’ version, children can listen to things like singalongs, lullabies, and soundtracks aimed at little kids. Older users have access to tracks and playlists of their own, including some popular tracks, that are appropriate and relevant for their age group. Parents will select their child’s age group upon launch.

In time, Spotify will expand the app with more content — including stories, audiobooks, and podcasts — and build enhanced parental settings and controls that allow parents to customize the Kids app further.

The new app also looks nothing like the main app — it’s colorful and bright, and has a look and feel that varies by the kids’ age group. For example, the younger kids see artwork that’s softer and character-based, while older kids have a more detailed experience.

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“Spotify is committed to giving billions of fans the opportunity to enjoy and be inspired by music and stories and we’re proud that this commitment now includes the next generation of audio listeners,” said Spotify’s Chief Premium Business Officer Alex Norström. “We are excited to be expanding the Spotify Premium Family experience with a dedicated app just for our youngest fans. Spotify Kids is a personalized world bursting with sound, shape and color, where our young listeners can begin a lifelong love of music and stories.”

The launch of the Kids app follows Spotify’s surprise earnings success this week, where it beat Wall St. estimates with net income of 241 million euros ($267.34 million), or 36 cents per share. Analysts had expected a loss of 29 cents per share.

The company also added 5 million new subscribers in the quarter to reach 113 million paying premium subscribers — up 26 million from the year-ago quarter.

Today, a Spotify Premium plan costs slightly more than a regular Premium account ($14.99 vs. $9.99 in the U.S., respectively). But many parents often just share their account with the whole family — often ruining their recommendations and special features, like Spotify Wrapped, along the way. A Kids app is a good incentive to convince customers to upgrade, as it’s not only solving those problems but also giving kids a safer, more curated experience within the larger music ecosystem.

There’s another incentive for Spotify to separate out Kids’ listening into its own space: targeted advertising. While the Premium experience has typically been ad-free, a new product lets artists buy a full-screen ad about their new music release and show it to interested users, based on listening history — even if they’re Premium subscribers.

This isn’t the first move Spotify has made in recent months to better cater to families. The company this summer launched a dedicated streaming hub in partnership with Disney, where families could find favorite songs, playlists and soundtracks. It also added parental controls to Premium Family accounts soon after, and launched a special “family mix” with songs everyone can agree on.

Spotify Kids is initially available in beta, while Spotify works to refine the experience based on additional insights gained from use as well as parentsfeedback. It requires a Premium Family plan to use.

The app is immediately available today in Ireland on iOS and Android, but is rolling out to all markets, the company says.

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Growth is out, profitability is in

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week Kate and Alex held the reins as a duo (check out our chat with Greylock’s Sarah Guo from last week here) to dig into an enormous raft of news. And don’t worry, it’s not all late-stage happenings. We’re discussing early-stage news every week because that’s what the listeners want!

Up top we dug into Kate’s excellent work covering the Superhuman founder’s new micro fund, or at least his attempt at raising such a fund. Our main question is how can he be a good VC and a good executive at the same time? Folks don’t tend to do both at the same time because they’re each more than full-time jobs. Having two such gigs sounds hard.

But hey, it’s not just athletes and musicians who can bring outsized interest to deals. In-demand founders can have a similar effect. We’ll be keeping a close eye on the upcoming fun. Moving on. 

Next, we turned to the other end of the venture landscape, looking at Founders Fund’s new capital vehicles. With a combined $2.7 billion in eventual capital, FF is hoping to build a financial redoubt from which they can rain capital down on late-stage targets, wherever they may be.

Is it a bit late in the cycle to cut late-stage checks to companies that might otherwise go public? That’s the gamble so far, as we can see it, but perhaps with WeWork’s IPO dreams turned to nightmares, there’s demand among a group of companies for another 12 months in the private markets. And that means more money is required.

On the theme of more money, Lime is raising some more and we were treated to new financial results from The Information’s great work getting the figures. Our discussion asked the question of how far the company’s unit economics could improve. Kate said that Lime is investing a lot now in developing better hardware so their scooters can last more than five minutes on the roads before breaking down. She thinks things will start looking up when it’s deploying only new, fancy, good scooters. Alex is bearish.

Before we could turn back to the early-stage market and wrap up, we had to cover the latest from WeWork. SoftBank did, in the end, come and save the day (at least for now) for the company, meaning that WeWork lives on, though layoffs are expected sooner rather than later. Who knows what the future holds…

And finally, Vendr, a company that is profitable, raised a $2 million round. This is interesting because, again, it’s profitable! And the startup willingly shared some financial data with us — a rarity. Read more about the recent Y Combinator graduate here.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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Airbnb’s WeWork problem

Airbnb may be another overvalued “unicorn,” but it’s no WeWork.

The Information this morning reported new Airbnb financials — indicating a massive increase in operating losses — that immediately call Airbnb’s future into question. Precisely, Airbnb lost $306 million on operations on $839 million in revenue, namely as a result of marketing spend, in the first quarter of 2019. In total, Airbnb invested $367 million in sales and marketing, representing a 58% increase year-over-year, in Q1. The company is gearing up for a major liquidity event next year and is making a concerted effort to rake in new customers, as any soon-to-be-public business would.

Given WeWork’s sudden demise, coupled with Uber and Lyft’s lukewarm performances on the stock markets, many have wondered how Wall Street will respond to Airbnb’s eventual IPO prospectus. Will money managers have an appetite for another over-valued Silicon Valley darling? Or will the market compete like mad for shares in the massive home-sharing marketplace?

But Airbnb, again, is no WeWork, and I wager Wall Street will have a much friendlier approach to its offering. For one, Airbnb’s co-founder and chief executive officer Brian Chesky isn’t dropping $60 million on private jets — I don’t think. CEO behaviors aside, Airbnb has more capital in the bank than it has raised in its entire 11-year history, which is a whole lot of money. This is all according to a source who is familiar with Airbnb’s financials and shared this detail with TechCrunch following The Information’s Thursday morning report. As for Airbnb, the company told TechCrunch, “we can’t comment on the figures, but 2019 is a big investment year in support of our hosts and guests.”

Airbnb’s CEO Brian Chesky speaks at TechCrunch Disrupt SF 2014

Airbnb has attracted more than $3.5 billion in equity funding at a $31 billion valuation and has even more locked away in its bank account. Additionally, Airbnb has an untouched $1 billion credit line, the source said. Presumably, the referenced credit line is the 2016 $1 billion debt financing from JPMorgan, CitiGroup, Morgan Stanley and others.

Moreover, Airbnb has been “cumulatively” free cash flow positive for some time, meaning that it’s seen more money coming in than going out during recent quarters, according to our source. It has been reported that Airbnb surpassed $1 billion in revenue in the second quarter of 2019 and in the third quarter of 2018, but we’re guessing the business did not top $1 billion in Q4 of 2018 or Q1 of 2019 because it if had, that information would probably have been “leaked.”

Finally, Airbnb has been profitable on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis for two consecutive years, the company announced in January. Gross bookings, meanwhile, are growing, as is Airbnb’s business offering and its experiences product.

Why does any of this matter, you ask?

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Source: Nike has picked up Russell Wilson’s Tally/TraceMe in a rare acquisition

Nike has long been synonymous with premium sneakers and other sports gear, but now it seems that the company could be extending its brand into another area — digital media — thanks to the rumored acquisition of a Seattle-based startup.

TechCrunch has learned from a source that the multibillion-dollar sports giant has acquired TraceMe, which originally built an app to let fans engage with sports stars and other celebrities before later pivoting into a service called Tally, a platform aimed at sports teams, broadcasters and venues to help fans engage around sporting events.

TraceMe was originally founded by Russell Wilson, the champion quarterback of the Seattle Seahawks, who was the executive chairman of the startup. The company had raised at least $9 million from investors that included the Seattle-based Madrona Venture Group and Bezos Expeditions (Amazon CEO Jeff Bezos’ fund), as well as YouTube co-founder Chad Hurley and others, and it was last valued, in 2017, at $60 million.

Our source said the deal closed in recent weeks and that “it was a good outcome” for the company and investors. It involved both IP — the main interest, the source said, was in TraceMe’s tech rather than Tally’s — and the team.

Indeed, at least eight of them, including TraceMe’s CEO Jason LeeKeenan, an ex-Hulu executive, are now listing Nike as their place of employment. LeeKeenan describes his new role as the head of Nike Seattle. Others on the team now have taken roles that include software engineers, head of product and product designers.

No one at TraceMe and Nike that we contacted has responded to our requests for comment, but just a little while ago GeekWire (which likely had the same tip we did) published a post noting that it had a source that confirmed the deal.

The athletic footwear giant Nike is no stranger to the world of technology: it has been a longtime collaborator with the likes of Apple to develop apps for its devices and has been an early mover on the concept of bringing and integrating cutting-edge (yes, possibly gimmicky) tech into its footwear and other gear. And that’s before you consider Nike as an e-commerce force.

But while the dalliance between sports, tech and fashion is well established, this deal opens up a different frontier for the company. It’s very rare for Nike to make an acquisition, but it makes sense that if it were going to do some M&A, it would be in the area of digital media and picking up engineers to execute on a wider vision in that area.

The company is best known, of course, for its shoes and related sporty clothes, which it has for a long time created in co-branding with the biggest sports stars and has more recently started to extend to a wider circle of celebrities and hot brands in a spirit of sporty street style. These have included the likes of so-cool Supreme, Travis Scott and seemingly tentative forays into music culture.

Nike overshadows all other sports shoe brands in size, with its current market cap at nearly $117 billion, more than twice that of its closest competitor, Adidas . But Adidas has been stealing a march when it comes to partnerships with a wide network of celebrities (even if Drake prefers checks over stripes).

While it isn’t clear yet how and if Nike will be using the startup’s existing services, you could see how a deal like this could help Nike start to think about how it might leverage the collaborations and endorsements it already has in place into experiences beyond shoes, advertising and athletic performance. In this age of Instagram and influencers playing a massive role in shifting consumer sentiment (and dollars), this could give Nike a shot at building its own media platform, independent of these, on its own terms.

This is a bigger trend that we’re seeing across a lot of digital media. Consider how companies like Spotify have extended beyond simple music streaming, investing in building tools to help artists on its platform with marketing and expanding their brands: selling shoes means selling a concept, and that concept needs to have a foothold in a digital experience. 

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Get ready to see more looping videos on Spotify, as Canvas launches into beta

Spotify is opening up its Canvas feature to more artists, the company announced this morning, which means you’ll see a lot more of those looping videos on the app starting soon. The feature has been in limited testing before today with select artists. When available, you don’t just see the album artwork behind the player controls — you see a moving, visual experience that plays in a short loop.

So far, Canvas has had mixed reviews from Spotify users. Some find the looping imagery distracting, while others simply prefer seeing the album art. Some people seem to like the feature. But others only like it with certain content and artists.

The challenge is in designing a video loop that works well. That means it shouldn’t be an attempt to try to lip sync to a part of a song. It shouldn’t include intense flashing graphics or text, nor should it distract people from being able to see the player controls and track information.

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Spotify also suggests trying to tell a full story in the loop rather than just drastically trimming a music video down to the time allotted (three to eight-second clips). Other recommended Canvas experiences are those that help develop the artists’ persona across their profile and tracks, or those that are updated frequently. Billie Eilish, for example, uses the feature to share animated versions of fan art.

Since launching, Canvas has been seen by millions of users, Spotify says. But the company seems to acknowledge the impact varies, based on how the Canvas is designed. When it works, it can “significantly increase” track streams, shares and artists page visits. But Spotify didn’t say what happens when the feature fails to engage fans.

However, based on social media discussions about the feature and how-to guides detailing how to turn the thing off, it would seem that some users choose to opt out of the experience entirely.

Today, Spotify says Canvas will no longer be limited to select artists, as it’s opening more broadly to artists in an expanded beta. With the beta, Spotify hopes artists will treat Canvas as a critical part of their release strategy, and will continue to use it across their catalog.

“It’s a way to get noticed and build a vision — and an excellent way to share more of who you are with your listeners, hopefully turning them into fans,” the company writes in an announcement. “The goal is for you to have richer ways to express yourself and to allow listeners to engage with you and your music even more deeply. We’re continuing to work on additional features, as well as more tools and metrics to help you better understand how your art is reaching your audience,” the company says.

It’s hard not to comment on the timing of this launch. At the end of September, Google announced that YouTube Music would not be preinstalled on new Android devices, taking the place of Google Play Music. With YouTube Music, streamers gain access to a visually immersive experience where they can watch the music videos, not just listen to the audio, if they prefer.

Spotify, however, has traditionally been a place to listen — not to watch. That’s not to say there aren’t music videos on Spotify, they’re just not well-highlighted by the app nor a core part of the Spotify experience.

The company says it’s now sending artists their invites to join the beta. Those who haven’t received the invite can instead make a request to be added here.

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Spotify gains Siri support on iOS 13, arrives on Apple TV

In a long-awaited move, Spotify announced this morning its iOS 13 app would now offer Siri support and its streaming music service would also become available on Apple TV. That means you can now request your favorite music or podcasts using Siri voice commands, by preferencing the command with “Hey Siri, play…,” followed by the audio you want and concluding the command with “on Spotify.”

The Siri support had been spotted earlier while in beta testing, but the company hadn’t confirmed when it would be publicly available.

According to Spotify, the Siri support will also work over Apple AirPods, on CarPlay and via AirPlay on Apple HomePod.

In addition, the Spotify iOS app update will include support for iPhone’s new data-saver mode, which aids when bandwidth is an issue.

Spotify is also today launching on Apple TV, joining other Spotify apps for TV platforms, including Roku, Android TV, Samsung Tizen and Amazon Fire TV.

The app updates are still rolling out, so you may need to wait to take advantage of the Apple TV support and other new features.

The lack of Siri support for Spotify was not the streaming music service’s fault — it wasn’t until iOS 13 that such support even became an option. With the new mobile operating system launched in September, Apple finally opened up its SiriKit framework to third-party apps, allowing end-users to better control their apps using voice commands. That includes audio playback on music services like Spotify, as well as the ability to like and dislike tracks, skip or go to the next song and get track information.

Pandora, Google Maps and Waze were among the first to adopt Siri integration when it became available in iOS 13 — a clear indication that some of Apple’s chief rivals have been ready and willing to launch Siri support as soon as it was possible.

Though the integration with Siri will be useful for end-users and beneficial to Spotify’s business, it may also weaken the streaming company’s antitrust claims against Apple.

Spotify has long stated that Apple engages in anti-competitive business practices when it comes to its app platform, which is designed to favor its own apps and services, like Apple Music, it says. Among its chief complaints was the inability of third-party apps to work with Siri, which gave Apple’s own apps a favored position. Spotify also strongly believes the 30% revenue share required by the App Store hampers its growth potential.

The streamer filed an antitrust complaint against Apple in the European Union in March. And now, U.S. lawmakers have reached out to Spotify to request information as a part of an antitrust probe here in the states, reports claim. 

Despite its new ability to integrate with Siri in iOS 13, Spotify could argue that it’s still not enough. Users will have to say “on Spotify” to take advantage of the new functionality, instead of being able to set their default music app to Spotify, which would be easier. It could also point out that the support is only available to iOS 13 devices, not the entire iOS market.

Along with the Apple-related news, Spotify today also announced support for Google Nest Home Max, Sonos Move, Sonos One SL, Samsung Galaxy Fold, and preinstallation on Michael Kors Access, Diesel and Emporio Armani Wear OS smartwatches.

 

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Spotify now lets you add podcasts to playlists

Spotify this morning announced a new feature that will allow users to add their podcasts to playlists. With the addition, users can create their own custom playlists of their favorite podcasts, or even those that combine music and audio — similar to Spotify’s own newly launched “Your Daily Drive.”

With “Your Daily Drive,” Spotify put its personalization engine to work to combine both music and news from select sources. But with the ability to now build your own podcast-filled playlists, you won’t have to rely on Spotify’s curation as much.

Instead, you can build your own podcast playlists by tapping the three-dot menu to the right of the podcast episode and then “Add to playlist.” You either can choose to add it a playlist you’ve already created, or you can build a new one from scratch. You can continue to add more content to this playlist, including music, if you prefer.

The company says this functionality is something users have regularly requested since the integration of podcasts to its streaming music service. However, it’s not necessarily the easiest way to tune into the latest episodes of your favorite programs, as it involves manual curation.

Many podcasts release new episodes every week or so — and don’t want to get stuck constantly building playlists for those. Instead, the feature makes more sense for curating a set of podcasts around a theme, or preparing yourself to binge your way through a few programs on a long commute or road trip, for example.

Spotify says today there are more than 3 billion user-generated music playlists on its service, so it believes that its users will embrace this new curation ability, as well.

Once a podcast playlist has been created, it can be shared with friends or the public, just like music playlists can be. This could make for an interesting marketing tool for podcasters, who could put together playlists of their best episodes or those with high-profile guest stars, for example, as a way to introduce newcomers to their shows. But it also could serve as a way for friends to recommend their favorite shows to others, by putting together a list of their all-time favorite episodes.

For those interested in tracking news and entertainment, they could build playlists of podcast episodes from different sources all focused on the same topic. For instance, a playlist offering everyone’s reviews of the new iPhone.

Over the past year or so, Spotify has heavily invested in the podcast market, including through acquisitions like GimletParcast and Anchor — as well as in its programming, like the deal with Barack and Michelle Obama’s production company, Higher Ground, for instance, and a quickly growing number of exclusives, windowed-exclusives and originals. It also hired former Condé Nast president of entertainment Dawn Ostroff to lead its content efforts.

Today, Spotify says it has “hundreds of thousands” of podcasts available to stream on its platform.

The new podcast playlist-building feature is mobile-only for now. On desktop, you can only stream the playlists you made, but can’t build them yet, Spotify says.

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Peloton, WeWork, Vox, Bodega, Kapwing and oh boy are we tired

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

As with yesterday, Kate and Alex were both on-site at TechCrunch’s San Francisco headquarters to chat over the latest. Unlike yesterday, however, Equity brought along a guest: Sean Dempsey from Merus Capital. (Merus writes seed and Series A checks, with a focus on enterprise companies.)

And thus the three dove into the news. Early-stage first, to shake things up.

Early-stage

Kate wrote a story this week about a startup you might have forgotten about but who’s name probably rings a bell. Bodega! The company now goes by Stockwell, actually, and they’ve raised a whopping total of $45 million in VC funding. But what’s in a name after all? We debate.

Next we turned to an interesting company called Kapwing. What’s that you ask? “It’s a laymen’s Adobe Creative Suite built for what people actually do on the internet: make memes and remix media,” says TechCrunch’s Josh Constine. We’re intrigued.

Late-stage and beyond

This week Peloton priced and went public. The firm’s $29 per-share IPO price was top of its proposed range ($26 to $29). The public markets, however, decided that the unicorn had reached too high.

So, shares of the high-end exercise company dropped, wrapping the day down about 11%. A good IPO first day this was not, though the company did manage to raise more capital than it might have with more conservative pricing. (Peloton has a yucky multi-class share structure that we touched on as well; it seems that all the big companies these days are opposed to regular governance.)

Next we turned to the Vox-NYMag merger. It’s a bit out of our territory but it’s a digital media deal, so we were interested. After all, the two of us have spent our entire careers in digital media and we have a vested interest in these companies surviving.

WeWork (Redux)

We honestly tried to get all the WeWork out of our system yesterday. We wanted to include zero WeWork content on this episode. But WeWork keeps doing things, so here we are.

Keeping things as brief as we can, WeWork is going to divest some companies that it bought (more on what we thought it was up to, here) including its jet, and the firm is looking to take on more capital. Unsurprisingly.

All that and we’re done for this week. Chat you all at Disrupt!

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify, Pocket Casts, Downcast and all the casts.

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Spotify’s app for artists gets a big revamp, adds real-time stats for listeners

Spotify this morning is rolling out an updated version of its app for artists, across both iOS and Android. The new app includes a refreshed design, as well as new analytics like real-time stats on how many people are playing artists’ songs around the world, most notably. Educational materials are also for the first time available through the app’s new Home tab.

Launched two years ago, the Spotify app already offers a way to see real-time listening stats for new releases for the first week they go live. Now it’s expanding its listening stats so artists can see how many people are playing their songs right now.

It’s also now easier to track important milestones in the revamped app, Spotify says — like when a song gets added to a playlist or the artist gains new followers.

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From the Home tab, Spotify will offer more recommendations on how to best use its tools and promote its Co.Lab events.

Here, artists will be able to read articles, watch videos and presentations, get advice from successful artists, learn about product updates and more.

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The audience analytics and music sections have also gotten a visual refresh, designed to make it easier to see the latest stats related to who’s listening, where and similar artists these fans like.

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And in a much-needed addition, artists or their managers can now update the artist’s profile in the app, including the ability to pick a new profile photo, rewrite the bio and update playlists and the Artist’s Pick directly from the Artists page in the app.

For those who are managing multiple artists, it’s now easier to switch between profiles.

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The update to the Spotify for Artists app is one of the more significant to arrive since the analytics dashboard moved to mobile back in 2017. And with the standout feature of real-time listening stats for listeners, the app is even more of a competitor to Apple’s artist dashboard, which just exited beta last month with the addition of Shazam data.

Spotify says the new app is rolling out this week across both iOS and Android.

Correction, 9/24/19 10:20 AM ET: The app offers real-time stats of current listeners for all songs overall, but not for any song. This was unclear. We’ve since corrected. Sorry for the confusion. 

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