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Spotify buttons up deals with Warner Music, launches music service in the U.S.

July 13, 2011 |  6:21 pm

Spotify, a popular European music service with ambitions to dominate the U.S. digital music market, said it has buttoned up the necessary licenses with major record labels to launch its service in America on Thursday.  

Spotify Logo The news has long been anticipated, since the company announced more than a year ago its plans to cross the Atlantic. But its entry has been bogged down by negotiations with music labels that have been cautious about opening up the world's largest and most lucrative music market to the young start-up. Spotify inked its last deal, with Warner Music Group, just this week.

Spotify's offerings will be largely similar to what it has in Europe, namely a free service supported by advertising and two premium tiers that let users listen without ads on computers and on mobile devices. 

The free tier will let new users listen to the company's catalog of more than 15 million songs from a computer connection for six months. After that, users will be capped at 10 hours a month and up to five spins for any particular song.

"You can still discover as much music as you want up to your heart’s content" even with the limits, said Ken Parks, Spotify's chief content officer and managing director of the company's North American business.

Subscribers who pay $4.99 a month can access the service without ads or limitations from a computer connection. A $9.99 tier also lets users listen to the service from a smart phone such as an iPhone, Android, Palm or Windows 7 device.

Spotify's service differs from online radio services such as Pandora in that it lets users pick exactly what they want to listen to, on demand. Pandora, by contrast, serves up songs that are similar to what users say they like, occasionally sprinkling in the exact artists that listeners want.

In that sense, Spotify's service is more akin to Rdio, MOG, Rhapsody, Slacker, Napster, Qriocity and other on-demand services that already operate in the U.S. But Spotify has been seen as a potentially disruptive competitor because its free offering is uniquely generous, giving users broad access where similar services offer only free trials lasting days or, at most, weeks.

Spotify also boasts one of the largest catalogs, with more than 15 million tracks from Universal Music Group, Warner Music Group, EMI Group, Sony Music Entertainment and Merlin, an organization that represents thousands of independent labels and artists, including Vampire Weekend, Adele and Arcade Fire. Competing services have anywhere between 8 million and 12 million songs.

"For the first time, American consumers are going to have access to a truly comprehensive repertoire of music," said Charles Caldas, chief executive of Merlin. "That’s been one of Spotify’s key factors in their success. They’ve been very diligent in ensuring their users have access to all of the music from all of the labels."

Labels, which have been concerned that Spotify's free service would lead consumers to stop spending money for music, have pressured the company to boost its number of paying subscribers, either by capping the free service or making its premium services more attractive. Spotify said a combination of changes to its service has helped boost the number of paying customers in Europe to 1.6 million, out of 10 million registered users.

Music labels have an interest in seeing Spotify succeed in the U.S. The five music groups that have licensed with Spotify own a combined 17% share in Spotify.

Spotify plans to open the doors to its service at 5 a.m. Thursday. Free users will need an invitation from the company (you can enter your email on the company's website to receive an invitation). Paying subscribers will not need an invitation to start using the service.

-- Alex Pham

RELATED:

Spotify alters streaming rules, adds caps to free service

Spotify U.S. debut looks harder as music services proliferate

 

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