Spotify, the popular European online music service, has told record labels it will cut down the free music it allows users to access without a paid subscription, according to people familiar with the plan.

London-based Spotify is set to announce the change in a blog on Thursday, these people said.

Spotify, which is in talks with labels to launch a service in the United States, typically lets users stream the 10 million songs on its service for free -- interspersed with advertising -- under its basic Spotify Open service. The listening time of about 20 hours each month will be reduced under the plan.

The paid subscription packages offer more music, which is also available on mobile phones.

Spotify executives were not immediately available to elaborate on the plan to cut back free service.

The move is seen as a drive to convert free users into paying subscribers for Spotify Premium or Spotify Unlimited, as the company tries to cover the costs of its music label licenses. Cutbacks on free music could also help the start-up reduce the rate it is spending funds raised so far.

The risk is that Spotify could alienate users who have become used to accessing a lot of their music for free through the service.

Spotify was founded by Swedish entrepreneurs Daniel Ek and Martin Lorentzon in 2006, and already has more than 1 million paying subscribers and 10 million registered users in Europe including the UK, France, Spain, Sweden, Norway and the Netherlands.

The company has been in talks for nearly two years with the U.S. arms of major labels but they remain concerned that Spotify's free service will cannibalize paid services like market leader iTunes as well as other subscription services like Rhapsody and MOG.

So far Spotify has inked U.S. deals with Sony Music Entertainment and EMI Music and is close to announcing a deal with market leader Universal Music Group. It has yet to reach a deal with Warner Music Group.

(Reporting by Yinka Adegoke; Editing by Richard Chang)

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