Spotify tries to challenge Apple in the U.S.
Apple’s iTunes may have staged one of the most successful coups d’etat in music retail history over the past decade, but upstart streaming site Spotify is looking to stage a guerrilla campaign of its own.
The Swedish site, which boasts 10 million users across Western Europe, is eyeing an imminent U.S. launch, hoping to make Apple’s model obsolete with its hybrid of free streaming, subscriptions and purchasing.
But Spotify faces an uphill battle, and while it is in talks to hammer out U.S. licensing agreements with the four major label groups, it has yet to secure deals with any.
The company offers a two-tiered membership.
Free users have access to streams of the 10 million-plus songs in Spotify’s databank on their computer. That service is supported by advertising. Premium users, who pay a monthly subscription fee, can access that music ad-free, and on mobile devices.
The assumption is that once users get used to having millions of songs at their fingertips, getting them to pay for uninterrupted, portable access will be an easy sell.
The company would compete directly with Apple in a number of sectors, especially as Apple is reported to be developing a cloud-based streaming service of its own. Spotify also boasts close Facebook compatibility with social media, an avenue Apple is looking to develop through its Ping function, launched with iTunes 10 in September.
Yet Apple’s success may make things harder for its would-be usurper. Steve Jobs’ defining sally with iTunes was persuading label execs to license their catalogs at favorable rates — and once they did, many found they had simply created a not particularly profitable retail juggernaut beyond their control. They may be wary of taking that risk again.
Also, should Spotify’s conversion rate — that is, free users upgrading to pay service — fail to live up to the company’s prognostications, labels worry they will have effectively devalued their product, giving up unlimited free streams and seeing little recompense.
Nonetheless, the company has seen rapid growth across Europe, and enters into American negotiations with the clout of Napster founder and key Facebook collaborator Sean Parker (a major shareholder) behind it.
Spotify hopes to launch Stateside by year’s end.
As Parker put it at a tech conference last month, “I think it’s going to be a very disruptive event.”