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

February 2, 2010 |  6:08 pm

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