Will Spotify take off in the US?

Spotify in the US

Spotify has become a huge success in Europe, allowing millions of users to listen to music of a variety of styles at any time of day they choose. But will Spotify take off in the US? Spotify, launched for public access in October 2008, has gained momentum like no other digital music service of the last six years.

Sweden's twenty month old music export has 7.7 million registered users across Europe, according to digital media tracker ComScore. That's roughly 10 times the audience of Rhapsody, which has been around for nine years and is the leading music subscription service in the US.

For over a year now, Daniel EK, Spotify's co-founder has been trying to bring Spotify to the US, but he's facing some very strong opposition.

The opposition he's facing is four of the industry's four major record labels - Universal, Sony, Warner and EMI. They have licensed their music to Spotify for use in the UK, Spain, France, Finland, Sweden, Norway, and the Netherlands, where most listeners tune in to the service free. But, in the US, the labels want the service to make them money and help compensate for a 65 percent drop in CD sales over the last decade.

Aside from the fact the service is free, the labels like Spotify for the same reason the listeners do - it provides the listener with a wide variety of music. Tunes from its eight million-song catalog load quickly, and listeners can compile playlists of their favorite tracks and gain access to them from any computer.

"Spotify is the first digital offering that has come along that people find sexy without having the Apple name on it," said Ted Cohen to Business Week, a former top digital executive at EMI Music, whose Tag Strategic advises companies on digital strategy.

The four big labels want Spotify, to scrap its free model and find a guaranteed revenue stream it could share with them, say music executives with knowledge of the discussions. In their minds, they want it to be like Rhapsody and US rivals eMusic and MOG, who charge monthly fees.

Daily number of Premium sign ups double

While outside of the US, the daily number of people signing up for Spotify's paid Premium service has doubled since the update to its desktop client in late April that added Facebook-fuelled social features and the ability to play a user's locally-stored music, Music Ally reported.

That's according to Spotify's UK managing director Paul Brown, in an interview for the latest Music Ally Report. "As we put Social and Local out there, Premium subscriptions doubled on a daily rate. For us, it's increased consumption, it's brilliant for discovery, and we're getting a net positive increase in people stepping up the ladder to pay."

In late January, the company confirmed it had 250,000 Premium users. By mid-March, that had risen to 320,000 according to CEO Daniel Ek, speaking at SXSW.

So, that's 70,000 Premium subs added in seven weeks, at a rate of 10,000 new subscribers a week. So it might not be wildly off-beam to surmise that Spotify is currently adding at least 20,000 paying customers a week.

Free streaming isn't positive

"Free streaming music services are clearly not net positive for the industry," said Edgar Bronfman Jr., chief executive officer of Warner Music Group, during an earnings call in February. Warner was an early investor in Spotify.

Spotify isn't just a free service though. If you want ad-free music, the music platform offers two premium plans in Europe. For GBP£4.99 a month, listeners get unlimited playtime with no ads, while GBP£9.99 buys you better sound quality and the ability to play music from a mobile phone.

So far only 320,000 users have signed up for subscriptions, a sign that Europeans exhibit the same resistance to paying for music that Americans do.

For the record labels, clearing that hurdle is crucial as CD sales continue to plummet and Apple's iTunes keeps its grip on digital music pricing. "Nothing in digital has been able to counter the decline in traditional revenue sources," said Ek, at an industry conference in March. Record companies, he said, are "concerned about how to ensure that people don't stop buying CDs."

The major music companies have been pressing Spotify to ally with wireless service providers so they can get a cut of the monthly charges. Spotify has tried that, signing a deal with Swedish telephone operator Telia. Plus, it has created apps for the Apple iPhone and handsets powered by Google's Android software.

Whether Spotify becomes an iTunes competitor will depend on the fickle tastes of consumers. One part of the equation will be whether the music labels let it do business in the US.

"Spotify is not the first streaming service in the world, just like iTunes wasn't the first digital download store," Orchard's Cohen said last year. "What it does that is so special is make a fairly complex model seem easy to execute. They have a great team running the company and I wouldn't bet against them."

Spotify has had his eye on the US since the end of last year, so will Spotify take of in the US? All we can say, is time will tell!

Jodie Humphries

Jodie Humphries graduated from Bath Spa University with a BA Hons in Creative Writing in 2008. She has worked for GDS Publishing for the digital group since July 2009. She has previous experience with writing for the web, running her own website since April 2007.

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