Spotify has just landed on US shores and already it is making waves.
After numerous false starts and months of haggling with the record labels, the subscription music service, which has gained a strong following in Europe, made its US debut yesterday.
Spotify is shaping up to be a new force in digital music that will compete with several rivals, including Pandora, Rhapsody, Mog, Rdio and even Apple’s iTunes.
Spotify differs from services like Pandora in that it allows users with free accounts to instantly access the songs they want to listen to. By comparison, Pandora selects songs based on users’ likes and dislikes.
Spotify’s debut sent Pandora, which just went public, on a wild ride. Shares of Pandora fell as much as 7 percent yesterday before closing down 0.8 percent at $17.79.
Spotify offers a free service supported by advertising, along with two premium tiers stripped of ads. The free service will normally be capped at 10 hours of listening a month, but for the first six months users will get unlimited access. Spotify has 10 million users in Europe, including 1.5 million paying users.
The major music companies own a combined 18 percent stake in the venture, alongside other investors, including Sean Parker’s Founders Fund. Parker helped get now-defunct music-sharing site Napster off the ground and was an early Facebook investor.
“Since Napster, the recorded music business has been steadily declining and, until now, there has been no light at the end of the tunnel,” Parker said in a statement. “Today’s historic announcement marks the reversal of this downward trend and the beginning of a return to growth by the recorded music business.”
Parker hailed the service as a way to finally bring music into the social realm, since users will be able to easily share their playlists and individual songs via Facebook and Twitter and also by e-mail and text.
One senior music-label source said Spotify had excited interest in large part because it had the potential to create scale, thanks to Facebook’s involvement.
“What we like about Spotify is that it has a very clear path,” the source said. “You get in the door for free and are then encouraged to subscribe.”
Success in the eyes of the music business means rapidly winning lots of subscribers, who will ultimately opt to pay for the service.
