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Spotify plans to rock the U.S. digital music landscape early next year

November 25, 2009 |  7:00 am

Spotify A tidal wave is washing over Europe, and it has already begun to transform the digital music landscape overseas. In the next few months, the company expects to make its way to the U.S.

Spotify is a program similar to iTunes that lets users listen to just about any song on demand. For free. The application takes a page from the Google model -- give a fantastic product away and plan to make money from ads.

It also has a "freemium" component -- that is a business model where the cow and milk are free, but the bells and hormones cost extra.

In order to play music on smart phones (including a spiffy iPhone app) or store songs to be played without an Internet connection, users must subscribe to Spotify Premium, a 10-euro-per-month plan. Each subscriber can sync three devices with up to 3,333 songs.

But Spotify has said in prior interviews that it expects the majority of users to stick with the free version. For that reason, U.S. record labels are skeptical, according to a recent story in the Financial Times. Subscription services such as Napster and Rhapsody have failed to attract significant followings.

The Financial Times also claims that Spotify delayed its launch in America due to roadblocks in talks with the labels here. Spotify spokesman Andres Sehr maintains that it's still on track to make its way stateside early next year, as the Swedish company has told Pop & Hiss for weeks.

Because "the U.S. is the largest music market in the world," Sehr said, "it's a long process."

Compared with the back-and-forth with European labels when Spotify was just starting out, this is nothing. "We negotiated with the record labels for two years before we launched," Sehr said.

"We've shown that we're really popular," Sehr said in a phone interview from Stockholm. "There's data, and we see how things work."

"Really popular" might be an understatement. According to firsthand accounts from folks across the pond, Spotify is practically ubiquitous in some circles. Barely a year old, the service hit the ground running in the half-dozen countries it operates in.

We've been testing the software for about three weeks. It blows the doors off of anything on the market and poses a major threat to several music services fighting for attention.

The ones we mentioned earlier, Napster and Rhapsody, priced at $7 and $13 a month, respectively -- done. Spotify can do just about everything those guys offer for free, supported by periodic ads that are fairly unobtrusive and can be tailored to the user's mood (based on song choices).

Piracy? Why do it? Most new music is just a search away on Spotify. It's even more convenient than piracy, and the price is right.

Apple's iTunes could certainly lose some sales. Songs you don't need to own can be streamed whenever you get the craving for some "Poker Face" (actually, that's a song you need to own). Plus, Spotify sells downloads for certain tracks in its library. For users spending all of their time in Spotify, why switch over to iTunes to buy a song?

ITunes won't be fizzling out any time soon. Its store has a stranglehold on the download market. It also has a richer interface, complete with artist info and reviews. Spotify's presentation is very simple, with a major emphasis on search rather than discovery. You have to know what you want.

For that reason, Internet radio services such as Pandora and CBS' Last.fm don't have to worry. Spotify's radio feature doesn't come close.

But on-demand listening has been dominated by YouTube and, more recently, services such as Lala, which got a major boost from its deal with Google. Spotify has a huge market to steal and monetize. As Wired notes, its playlist feature, which lets you organize streaming music, is indeed the killer app.

Spotify came under fire recently in a report citing that Lady Gaga earned $167 from royalties in the last few months. This is a stupid argument. Artists, especially those signed with majors, make pennies or less per track sale and practically nothing for a stream. That's nothing new to this service.

The industry that would probably suffer most from Spotify is piracy. Labels should note that earning something is better than nothing, and this app is the best shot we've seen at stomping out a black market that has flourished online for more than decade.

-- Mark Milian
twitter.com/markmilian

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