Spotify is coming, but are we ready?

by Philip Gray

Spotify, the streaming music player created in Stockholm, Sweden, has been slated as “the iTunes Killer.” Being only available in the U.K. and few European countries has added to its mystique in the U.S. It has been blogged and reviewed all over the Internet, to mostly positive press. The music player easily integrates with Facebook and Last FM, allowing users to share playlists with friends instantly. But is the U.S. (and more importantly, Spotify’s competition) ready for this “revolution” in the way we find and enjoy our music? And what are some of the issues that Spotify faces in its efforts to reach US soil?

Spotify was developed in Stockholm, Sweden in 2006 by a team founded by Daniel Ek and Martin Lorentzon.

The service has four levels: Free, Day-Pass, Unlimited and Premium. They break down like this: The Free tier has gone through a roller coaster of being free to the public and being reduced to invitation-only.  It is currently being called Spotify Open, which allows for users to listen to music with advertising for 20 hours per month before being prompted to pay and upgrade. The Day-Pass, which is now discontinued, ran £0.99 and let the user listen to ad-free music for 24 hours. The service was discontinued after the Unlimited option was made available. Unlimited gives the user ad-free access to the library for £4.99. The music is streamed at 160 kbit/sec. Finally, there is the Premium option, allowing essentially the Unlimited option on crack. It gives ad-free music, with offline playback and mobile access, as well as streaming at 320kbit/sec (the fastest in the online music scene).

Thought the program was released for public consumption in October 2008, its free version was an invite only affair. In February 2009, the program was opened up to the U.K allowing for free registration. The amount of registrations and the launch of Spotify mobile caused the service to restrict the Free option back to invite only.  The mobile version has been released now for the Android, Palm and Blackberry OS, including the iPhone, although it has yet to be approved in the app store.

Spotify has not only had issues technically. The company faced rumors of an Apple buyout last year.  Maybe a little back-story is necessary. Apple had been rumored to be working on its own little streaming service, including the construction of a ‘data center’ in North Carolina. To further the rumor, it was thought that Apple, after already acquiring Lala in 2009, was going to try and absorb Spotify as well. The thought was that Apple was going to use these companies to fuel its own cloud-based streaming service or to even gang up against Internet giant Google’s own ambitions of entering the music marketplace.

As well, Spotify has been said to have had issues with getting its payment out to indie labels, as well as only paying some artists out of revenues earned from advertising, not from amount of streams. One label has even claimed that it has only received NOK 19 ($3.00) after its artists have be streamed more than 55,000 times!

Despite all this, Spotify is in no way doing badly for itself.  As of May, the company had seven million users, with 250,000 of them paying members. The market seems to like the idea of free streaming music, but labels in the U.S. are going to need a more stable income stream before they are willing to get behind the service. On a funny side note, the subscription numbers just seems to interestingly prove the old model of the industry, that the customer wants what’s free (seven million) while not many want to drop a dime on it (250,000 of seven million could spare $10 a month)

The labels want Spotify here. The consumers want Spotify here. But how it will perform over here is purely up to the marketplace and the circumstances upon its introduction. But I will be the first to say that I’m extremely interested in trying the service and seeing if it really is the iTunes slayer that its touted to be.

Spotify Website: www.spotify.com

Sources:

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