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

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

Comments

[M]

Spotify has totally changed how I listen to music, and I have totally quit piracy downloading.

The playlist feature is brilliant, the same goes for the share playlist and collaborative playlist feature, and how one you can search and search and search for music.

I have just installed Spotify on my Nokia E71, and the sync playlist is truly genius. The offline playlist funtion means I don't have to bring my iPod anymore.

Be afraid Apple.

[John Rosenfelder]

i believe spotify is a good way to wean a certain portion of the music audience off of the habit of listening to something new by downloading a free copy. it's a behavior modification project, not a business model.

the next few years are going to be great for the music business however, as more legal and convenient services like spotify and google audio are created and the lost revenue of the past 15 years is recaptured. we will probably see real artist development return as opposed to the idol/karaoke model.

judging spotify on its own, however, i think lady gaga has a legit beef, that people don't really want to be their own djs, and that owning a library that can be heard on many devices without wifi is what people want.

[Richard Cray, Esq.]

Mark Millian should get his facts straight before advising recording artists to bend over and take it in the ass.

Artists may be struggling, but even those signed to major labels make more than "pennies or less" for track sales. Even where such artists do not also participate as producer, songwriter or publisher, the average per track artist royalty for an iTunes download is roughly 8 to 12 cents. That's about 1000% more than a penny, Mark. And if that Artist retains publishing, double that figure.

And if a track recorded by an independent artist is sold through a distributor such as CD Baby, the gross royalty after that distributor's take is closer to 60 cents.

While these figures are nothing to celebrate, there is also no reason to resign ourselves to the next cool internet site Mark Milian sees on the horizon. I for one reject his notion that Lady Gaga should be happy with her $167. And tens of thousands of musicians, recording artists and label executives here in Los Angeles do too.