SXSW: Spotify Keeps U.S. in Suspense

Daniel Ek, the 26-year-old CEO and co-founder of the much-talked-about music service Spotify, spoke in front of a crowded house here at SXSW, but did not answer the question that was on everybody’s mind: When will Spotify become available in the U.S.?

Spotify, which is available only in six European countries today, has garnered worldwide attention for the unprecedented rights and control it gives music lovers for little or no cost. Most of Spotify’s 7 million users pay nothing for the service, but can play any music they want on demand in exchange for viewing some ads. Another 320,000 users pay for the service, and get higher bit rates, offline listening and no ads.

Spotify’s launch in the US – by far the world’s biggest music market -- has been highly anticipated by music lovers. But some people speculate the U.S. labels and their lawyers won’t make it easy for Spotify to do business in its current form in this country. Warner Music CEO Edgar Bronfman has worried publicly that with free services like Spotify around, why would people go out and buy music.

Spotify is now making the agreements necessary for entry into the U.S. market. That means swimming through the massive process of making deals with the hundreds of U.S. music publishers, with the associations that collect royalties for the record labels, and with the record labels themselves. Ek continues to say his service will launch in this country, but acknowledges that “there could be slight changes” in the U.S. version.

So what’s all the fuss about? What makes Spotify so special, and threatening? Well, beyond the fact that it’s available for free, it offers an array of clever features that give users a lot of control over when and where and how and what they want to listen to. It does pretty much everything iTunes does in the way of searching for, playing and buying music.

You can also collaborate with your friends on playlists via e-mail, Twitter, or Facebook. You can drag whole albums into a playist. You can do advanced music searches (singles released in 1984, for example) and sort the results. You can cruise through detailed artist pages that include full links to the artist’s music, along with bio information, related artists, and customized radio stations.

Ek says making money from music isn’t what it used to be, and that focusing only on selling CDs won’t “save the record industry.” Ek says the industry must embrace multiple business models, which could include both free and paid services, digital downloads, promotional downloads, subscription plans and alternative forms of merchandising.

“I am willing to pay for music because I want to own it, but I don’t want to own some dumb CD package,” Ek says. “I might buy a box set, if it has a T-shirt and extensive notes in the box.” Other buyers might buy digital albums, so long as they include extras like live and bonus tracks.

Spotify has also been busy moving to mobile platforms. In Europe you can buy Spotify as part of your wireless service plane when you buy a smartphone. For instance, Telia in Sweden actually subsidizes the service so that new subscribers can get three to six months of music for free. Ek demonstrated the Spotify mobile app running on a Sony-Ericsson X10 Mini Android phone, which will release in the US in the next few months.

Ek says eschewing DRM and embracing mobile platforms would be a smart move for the record industry. “I think if you could get all the music you wanted on your favorite device, the music business would be radically bigger than it is today,” he says.

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