Spotify music service launches in the U.S.

After two long years of negotiations with record companies, Spotify, a Swedish streaming music service, is finally launching today in the U.S. after hammering out deals with the big four labels of Universal, Sony, EMI and Warner Music to stream around 15 million tracks.
As the eighth nation to welcome Spotify and the first outside of Europe, America is the biggest music market in terms of revenue – but the company will have to tread carefully. Free accounts in the U.S. are available via email invitation by signing up at the Spotify website, are ad-supported and are limited to 10 hours per month after the first six months. After a user reaches the 10-hour cap, they will be asked to pay for more access.
An ad-free version is available for $4.99 a month that contains unlimited streaming but without mobile device and offline access. A premium account with mobile device and offline access for $9.99 is also unlimited. Under the premium plan, songs can be stored for offline play so a user is never without music, even if stuck without an internet connection or suffering weak mobile data service.
In May, Spotify announced the unpopular move that it would limit free account holders to 10 hours of streaming a month (after the initial six months) with an additional cap of five plays per track. Free account holders make up around 8.4 million of the company’s 10 million users and the move was perceived as a concession made to record labels. In June, Spotify announced it raised $100 million from Digital Sky Technologies, Accel and Kleinter Perkins to help launch the service in the U.S. and funding valued Spotify at upwards of $1 billion. Rival music streaming service Pandora recently launched its IPO and is currently valued at $2.8 billion.
Daniel Ek, founder of Spotify, said the goal of the service is to rival the convenience of pirated products and provide a simple interface. The software is commonly compared to that of iTunes and user satisfaction appears high.
The International Federation of the Phonographic Industry (IFPI) reported that Spotify is the second-larges source of digital revenue for record labels in Europe, lowering concerns about minuscule royalty payments to musicians.
The service faces a tough climb in the U.S., as Pandora, Mog and Rhapsody will fight to hold onto their users at the same time Amazon and Apple increase cloud-based services and Google looks to expand in the space. Pandora alone has more than 100 million users.
One big move for Spotify is its alliance with Facebook, which will host the streaming service on the social network. The 650 million users will certainly help make Spotify a more recognized name in the U.S.
Principle analyst Giles Cottle of Informa Telecoms & Media stated that Spotify’s success revolves around the how the company positions its free and paid services.
“Yet what will really determine whether Spotify will thrive or merely survive is the free element, which is currently available via invite only and is capped at 20 hours listening per month before dropping further. None of the music on-demand services in the US have a free element beyond limited trials and Pandora’s rabid success is built on the back of most elements of the service being free,” writes Cottle. “While none of this may appease (understandably) cautious label execs, the fact remains that Spotify would not have got one million plus paying subscribers in Europe without being able to introduce users via the free service. It may not get that many, even across the vast swathes of the US, if it is forced to cap its free offer too quickly.”