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spotify, spotify versus itunes

Could Music Site Spotify Be the Death of iTunes?

July 23, 2009 05:00 PM
by Haley A. Lovett
U.K. music-streaming company Spotify has plans to enter the U.S. market later this year; some think it will be a threat to iTunes, but are the companies really competitors?

Spotify vs. iTunes, a Comparison

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Spotify, the free music service that, according to Eliot Van Buskirk of Wired.com, is by far the most popular music sharing service in Europe, is looking to enter the U.S. market. The company, founded in 2006 by former CEO of uTorrent Daniel Ek, offers a large catalog of music to its users and has two subscription plans, one free with ads, the other paid without advertisements and with a few extra features.

Users must download the Spotify player, but can then choose songs or albums to play. The Spotify player will look familiar to iTunes users, but Mark Hattersley of Macworld points out that Spotify has some features users may prefer to using iTunes. These features include not needing to import CDs to your library and not using up much hard drive space but providing access to a huge library of music. Hattersley also points out that users can log in to Spotify from any computer, and have access to the same music library. Spotify also allows users to collaborate on playlists, or share playlists and songs by sending friends a URL.

Unlike direct competitors to iTunes in the MP3 download market, such as Amazon or eMusic, Spotify may actually complement the service. Even now, Spotify provides links to download a part of its library from the iTunes music stores, however, according to Tim Walker of the Independent, the service recently struck up a deal with London-based MP3 seller 7Digital, and may push that as the store of choice for its users. Walker also mentioned that Amazon was a featured MP3 seller on the service. Rather than killing iTunes itself, the real question may be whether Spotify boosts one of iTunes’ competitors such as Amazon to the top of the MP3 sales market through referrals if it becomes popular in the U.S.

For now, Spotify only has music licenses to serve certain European countries, but is looking to license content for the U.S. before it will launch here.

Spotify a Threat to Other Services Like Pandora, Last.fm?

Spotify could be more of a threat to music streaming services and online radio stations such as Pandora or Last.fm. Whereas Pandora and Last.fm only allow users to choose a starting point for musical exploration, Spotify lets you create specific playlists or listen to an album from start to finish. However, according to the site, Spotify has set up integration with Last.fm and may look at integrating with Pandora, a service with a mostly U.S.-based audience, once it moves here.

One thing Spotify does have in common with online radio and streaming players such as Last.fm and Pandora is its revenue model. Spotify relies on affiliate fees from songs purchased through MP3 sales sites, and user subscription fees for its premium service. And not unlike other music services with a paid option, according to Wired.com, Spotify is having some trouble getting users to pay for the service. However, CEO Ek seems to think that if Spotify offers the right services such as the planned launch of mobile applications and the already-present better bit rate for paid users, that paid subscriptions will grow.

Legal Digital Music Versus the CD, Illegal Downloads

Although compact disc sales were still the most popular form of music purchase in 2008, CD sales were down 20 percent from 2007, according to Anne Szustek of findingDulcinea, and music companies are shifting the focus to earn revenue from digital downloads.

The trend of digital downloading has had a ripple effect for record stores, with more than 3000 stores in the U.S. closing since 2003, including former retail giants Tower Records and Virgin Megastores. It isn’t just paid avenues of digital download that are putting stores out of business, Liz Colville of findingDulcinea pointed out in April of this year that estimates have put the amount of illegal music downloading at around 95% of all music files downloaded in 2008.

Getting users to pay for digital music has been a struggle since the birth of the MP3 and the emergence of file sharing networks such as Napster nearly a decade ago. The Recording Industry Association of America (RIAA) has become infamous for suing users downloading illegally in the U.S., although in recent months has stepped away from the mostly unsuccessful lawsuits to pursue other avenues to dissuade users from illegally acquiring music online, looking to Internet service providers such as AT&T to alert users when illegal download activity is detected.
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