mSpot Opens Up Freemium Cloud Music Service in a Bid to Pre-empt Apple and Google; In-Depth Q&A with CEO Daren Tsui

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RIM or Android phone? How do you synch those devices? For Windows Mobile, Android, and iPhone, we can become a one-stop shop.

X: You’re charging fees for online storage of more than 2 gigabytes. Do you plan to monetize the mSpot music service in any other way?

DT: Honestly, I don’t know what’s going to be the most profitable piece of our business. I think storage is going to be a component, but our strategy is that we could potentially be the iTunes not just for your phone but for all your devices. We want to offer a music cloud service that allows users to play the music they already own in a very easy way. We want to lower the barrier to entry so that there is a free tier, and amass millions of users who come to mSpot on a daily, weekly, or monthly basis. After we reach a certain scale, then you will see us launch up-sell opportunities. At the beginning of next year you will see a music subscription service. We already have a movie service [through mSpot’s carrier partners] so it wouldn’t be hard to light that up as well. But we’re not rushing to do the up-sell and cross-sell, because if we don’t get the freemium model right, if we don’t amass millions of users, we are not going to get to scale, and if we don’t scale, it doesn’t matter what we cross-sell.

X: With the iPhone and Android, Apple and Google have broken past the old on-deck model where the wireless carriers controlled what apps were on their phones. Do you feel that you have to start a direct-to-consumer service like this in order to survive as a business in the post-deck world?

DT: I believe we do. I think we have done a pretty decent job of growing the service provider business, and without that business we would have had a very difficult time reaching profitability. We’ve been profitable basically since the end of 2006. But a typical problem of a service provider is that at some point you are going to get squeezed, either by the carriers you work with, or by the content providers you get content from. So I think that we are going to continue to grow that business, but I believe we do have to expand beyond the service provider business to be a big, very successful company.

X: And presumably you feel that your experience running the carrier-mediated service puts you in a good position to run a consumer cloud service.

DT: Absolutely. I think we are farther ahead than any other competitor on the mobile side. When you get a chance to use the Android application I think you are going to see very clearly that this application is different from the typical mobile streaming application. The other thing is that the carriers still play a very relevant role; they are still a source of billing, for example. We have all these billing APIs, and we have relationships with these folks. So we are looking at partnerships where people don’t have to pull out credit cards when they want to rent movies. As well, I think we’ve got a lot of credibility in the industry and with media companies. When we launch a service, we are a known quantity.

X: I have to ask you the G question and the A question. What happens to mSpot when Google launches its rumored streaming music service? Or when Apple brings Lala back in some new form?

DT: Last month Google purchased Simplify Media, which allows you to stream music from your PC to your mobile phone. There are a couple of big issues with that. First, that is not a cloud service, it’s peer-to-peer. So if you shut your computer down, it stops. Second, it’s pure streaming. So what happens when your coverage is spotty or you’re on a plane? I feel that Google, with the purchase of Simplify, was looking for a stopgap solution—something quick and dirty so that they … Next Page »

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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