US record companies were reluctant to sign agreements with music streaming services operating advertising based services.
14 July 2011 | Category: Software
European streaming music service Spotify has set its sights on the U.S. market after working out deals with major record companies, who were unconvinced about its ability to make money.
The company's current statistics stand at about 10 million users across Europe, with 1 million of those paying for premium service. With the U.S. launch on the horizon, Spotify has cut back some elements of its free service, including limiting the number of times the free version could play a particular track, and reducing the listening time to ten hours per month.
American record companies have been reticent about moving to ad-funded and subscription-based distribution services because it is generally acknowledged that the sales returns for artists and record companies can be exceptionally low under from services such as Spotify, Last.FM, and Rhapsody. The pay for each click for a given track can sometimes be counted at a fraction of a penny, according to industry analysts.
The numbers may improve for Spotify assuming they can break into the American market. The service has won some high-profile users, such as Facebook founder Mark Zuckerberg, and composer and Nine Inch Nails frontman Trent Reznor.
Still, Spotify will have to overcome heavy competition, mainly from the U.S.-based online jukebox Pandora, which currently boasts about 100 million registered users.