Spotify Comes to US; Is Pandora Hearing?

The award-winning music service Spotify that's taken Europe by storm has now come to U.S. shores.

Spotify, a Swedish music streaming service, had been trying to venture in to the United States for a long, but it has not been able to sign the major record companies, including Warner Music Group. But, now it seems the wait is over.

We believe that music is the most social thing there is and that's why we've built the best social features into Spotify for easy sharing and the ultimate in music discovery. Even if you aren't a total music freak, chances are you have a friend who is and whose taste you admire. I'm looking forward to connecting with some of you in Spotify and discovering some cool new tracks, Daniel Ek, Founder and CEO of Spotify, said in a statement

Users can register either for free accounts supported by visual and radio-style advertising or for paid subscriptions without ads and with a range of extra features such as higher bitrate streams and offline access to music. A paid Premium subscription is required to use Spotify on mobile devices.

Spotify offers a free ad-supported service, a $5/month subscription, and a $10/month subscription.

In Europe, Spotify offers ad-free subscriptions for about GBP 4.99 (about $8) per month for PC-only access and charges GBP 9.99 (about $16) a month with mobile access.

Users can simply drag and drop music to their Spotify friends, or share with them via Facebook, Twitter, email and SMS. One can see their friends' top tracks, artists and playlists via their Spotify profiles, subscribe to their playlists and drop tracks into their Spotify inbox.

They can take their music with them by installing Spotify on your cellphone or iPod Touch. Users can also wirelessly sync their MP3 playlists to listen offline and subscribe to Spotify Premium to combine their own music with access to Spotify's catalogue of over 15 million tracks

Spotify currently boasts 10 million European users, up from a million only two years ago. The firm's cloud-based model goes head-to-head with similar high-profile services from Apple, Amazon, and Google -- but without the 'hassle' of actually buying (let alone uploading) the music first.

On the downside, Spotify has come under criticism from some smaller artists and labels who show that they receive drastically reduced compensation compared to the major record labels that glowingly support the service.

Analysts have wondered just how the service can support its free tier, which accounts for approximately 90 percent of its users, and whether the tier is sustainable at all in the long run.

Spotify, which was founded in April 2006 by serial entrepreneurs Daniel Ek and Martin Lorentzon, is available in Finland, France, the Netherlands, Norway, Spain, Sweden, and the UK.

Spotify has been available solely in Europe since its initial launch in October 2008. The service has already amassed more than 10 million users there, more than a tenth of whom pay for the service.

In June, it was reported that Spotify had secured another $100 million of funding and plans to use this to support its US launch. The new round of funding saw the company valued at $1 billion.

Spotify generates revenue from paid subscriptions, ads and music purchases from partner retailers. In March 2011, Spotify announced that it has one million paying subscribers across Europe.

A payment of a monthly fee upgrades an account to Premium status, which removes advertisements, increases the bitrate to 320 kbps, removing streaming limits and allows usage of mobile clients for iOS, Android, Symbian and Windows Mobile 6.x devices.

During 2010 Spotify paid more than 45 million euro to their licensors.

Competition

In U.S., Spotify will have severe competition from Pandora (NYSE:P), which just completed its initial public offering.

As of April 2011, Pandora had over 90 million registered users and is adding a new registered user almost every second. Pandora has over 50 percent market share in Internet radio listening time among the top 20 stations and networks in the United States.

Spotify may also compete with Rhapsody and Grooveshark.

The level of competition in the U.S. may be the reason why Spotify is planning to team up with Facebook to establish a solid American user base right out the gate.

Mark Zuckerberg, founder and CEO of Facebook, had once said: Spotify is so good

Meanwhile, Spotify comes to US at a time when consumer's mobile internet usage is surging every day.

In 2008, mobile access accounted for 4.6 percent of total listener hours. However, by first quarter of 2011, this figure had increased to around 60 percent.

In 2010, there were 103 million consumer mobile devices using the Internet in the United States and IDC expects this to grow to 168 million by 2014.