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With momentum in Europe, Spotify has Apple's iTunes in its sights

Daniel ek Spotify, the Swedish music streaming software that's rocking Europe, has huge ambitions. Though still limited to six countries and yet to launch in the U.S., Spotify founder Daniel Ek is setting his sights on America's top music retailer and digital jukebox -- Apple's iTunes.

During a Q&A at the one-day New Music Seminar industry conference at the Henry Fonda Theater on Tuesday, Ek drew frequent comparisons to iTunes, and dropped in a few criticisms as well.

"We want to be the platform where you organize your music," Ek said at the event. "This is the cloud that everyone is talking about."

The "cloud" describes the Internet streaming model that exchanges ownership with convenience. Hulu is the Web's cloud equivalent for TV.

Most Spotify users choose to listen to and organize the software's 8 million tracks into playlists, and Spotify allows them to do it for free. Like iTunes, simplicity is at the top of developers' minds.

In order to cheaply download tracks, cache songs for offline consumption and access music from cellphones, 250,000 people -- mostly in Scandinavia and the U.K. -- are paying 10 euros or 10 pounds per month (that's $13.97 and $15.98, respectively). Other perks include removal of periodic banner and audio ads.

Rather than target what Ek calls "niche services" like Rhapsody and Napster, which charge all users a monthly fee, Spotify seems to be gunning for the big Apple.

"It's sort of like the world's biggest music library on one hand and digital mix tapes on the other hand," Ek said during the keynote. Since launching in October 2008, Spotify's 7 million users have created 100 million playlists, Ek said. Like iTunes' not-so-popular iMix feature, songs are organized into convenient packages by theme or mood.

Spotify is planning to build the future of its product around social networking. "Twitter is one of Spotify's biggest traffic sources," Ek said. Apple recently added buttons in iTunes for sharing songs on Facebook and Twitter.

Perhaps the biggest reason Spotify is so popular is that "it's almost too good to be true," said Trond, a Los Angeles musician who previously worked on a similar music start-up called Ezmo that was eventually acquired by Microsoft and stagnated.

"I can get all of this music for free?" Trond said. "It's like when Gmail launched with a gigabyte of space."

Google's e-mail service surprised other free mail providers like Hotmail and Yahoo when it changed the game by offering a ton of virtual storage space. It also spread virally thanks to an invite-only model that gave it an air of exclusivity.

Spotify used the same invitation concept to spread in Sweden. The hotly anticipated service will do the same when it launches in the U.S. before the middle of this year, Ek said after his speech in a private interview in the Henry Fonda Theater's green room.

"It's good for scaling," Ek said of having pioneer users invite select friends. "Especially in the U.S. where bandwidth can be a bit janky." Spotify was blamed for overloading Oxford University's Internet system when it launched in England. Ek alluded to the same happening when it roots in colleges here.

Talks are continuing smoothly with major labels despite rumors to the contrary, Ek said. In the last two days, Ek said he's spoken with Universal, Sony and EMI. Publishers are giving the company some pushback, but Ek maintains that "it looks pretty good." He's still counting on an U.S. launch within the next few months. 

"I didn't come from the music industry," Ek said onstage. "I didn't know what kind of licenses you'd need." But he's learning fast.

In the same way Boxee is always careful not to insinuate that its free service could kill cable TV (its founder Avner Ronen doesn't subscribe to cable), Ek is somewhat careful not to imply that streaming will kill album sales.

"I don't think we're replacing the notion of ownership," Ek said. "Ownership is becoming less important, yes."

Ek thinks the music industry needs to package records in a way that makes them more attractive to consumers rather than just short playlists of songs. But that's not on Spotify's list of priorities.

-- Mark Milian

Photo credit: Mark Milian / Los Angeles Times

Comments () | Archives (6)

The music industry doesn't really need to package records in a way that makes them more attractive to consumers. It is a waste of time and money. The music industry simply needs to think outside the box and embrace new music distribution technologies like Didiom Pro.

I guess I'm not clear here. Spotify is "free", but users pay $13.97 or $15.98 a month to be able to download songs? You can stream for free anytime, anywhere? Why would anybody pay? What's the "free" part? Being able to arrange the titles in a list someplace?

Pardon my ignorance, but this is confusing. I feel like a geezer here. Are there ads to contend with for the "free" part?

I have heard from some contacts in the music biz that Apple is negotiating with labels right now in order to put everything in a "cloud" similar to how Spotify does. Keep in mind that Apple recently (and quietly) acquired the music streaming site Lala.com. Although Jobs didn't say anything about it, my contacts told me this is the real point of the Ipad, to provide a device where all media can be streamed. I understand all the Ipad critics. Because as it stands, the device seems pretty lame. But if Apple can pull this off and stream music, TV, movies all on one device, they will kill the game. Just something for folks to keep in mind.

Many have tried to compete with Apple in its own space, none have succeeded.

@Rick Starr
You're correct, the free version is ad supported. Every 10-15 mins, there's a short 15-30 sec audio and/or banner add which you can't interrupt.
Paying for the service, £10 per month, gives you higher quality audio streams (up to 320kbps I think it is) and removes the ads. They also do a day pass for 99p, which is pretty good for parties where you wouldn't want the ads popping up after a great tune... would kinda ruin the atmosphere!
Another bonus with paying is the Spotify app for iPhone. You can't use it with a free account, but when you have a subscription, you can access your playlists and even store them on your phone for offline play.
I've got a free account in the UK myself and love it. I really don't mind the ads, they're well placed, not too obtrusive and it's reminiscent of commercial radio (ie non BBC). When I'm not living on a student's budget I might consider paying for it. Spotify's organisational system is different, not better; it's more search based, but does provide recommendations based on the artists you listen to. I really do love it, as it means I can listen to as much music as I want, for free, without pirating.

This all seems bogus when you can use Grooveshark. Grooveshark does not interrupt your music with ads and you can access it from any computer worldwide. Just signup for a free icloud.com account and begin using Grooveshark for free.


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