Swedish music streaming service expands beyond Europe for first time after two years of negotiations with record companies
It has taken two years of intense wrangling with record companies and triggered wave after wave of speculation about future business models for the industry – now Spotify, the Swedish streaming music service, has finally announced that it will launch in the world's biggest music market, the US, on Thursday.
Spotify's US launch has been dependent on signing deals with the four largest record labels – Universal, Sony, EMI and Warner Music – though Warner is understood to have only completed the deal on Wednesday this week.
Free accounts will be limited in the US to invitation only, though an ad-free version for $4.99 (£3.09) per month and premium account with mobile access for $9.99 will be unrestricted.
The US launch, and the protracted negotiations with record labels, was preempted in May by an unpopular adjustment of the terms of use for its free account holders, who make up about 8.4 million of its 10 million users. Accounts were limited to 10 hours streaming per month with a cap of five listens per track.
The move was seen as a concession requested by record companies, and then in June it was announced that Spotify had raised a further $100m funding from Kleiner Perkins, Accel and Digital Sky Technologies to drive its US launch. The funding valued Spotify at around $1bn, and closely followed the initial public offering of rival music service Pandora, which now has a market capitalisation of $2.8bn.
The US is only the eighth country Spotify has launched in, and the first outside Europe. It launched in the UK in February 2009. Spotify's software is designed to subtly echo that of iTunes, but with a more flexible and less proprietorial feel. Founder Daniel Ek has said that the aim of Spotify was to create a simple, compelling service that bettered the convenience of pirated products.
Though there has been concern about low royalty payments to artists, the International Federation of the Phonographic Industry has said that Spotify is now the second-largest source of digital revenue for record labels in Europe. But it also faces more intense competition in the US, where established rivals Pandora, Rhapsody and Mog have already built audiences and where cloud-based services from Amazon, Apple and soon Google will also compete for consumer attention and spend.
Spotify's thorough integration may prove to be its biggest advantage. Analyst Rich Tullo at Albert Reid & Co said earlier this week that Spotify presented the biggest challenge to the existing digital music services.
"Spotify is really the biggest threat, in our view. It's going to sell into Facebook's 650 million users, and if you look at the growth of Zynga, it's clear that an alliance with Facebook is definitely what you want because its the biggest distribution channel out there."
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Source: http://www.guardian.co.uk/technology/2011/jul/14/spotify-launch-us-record-labels
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