Summary:

Spotify is set to more closely compete with Apple’s iTunes and iTunes Store, by upgrading its pay-to-download music features and extending i…

Daniel Ek And Martin Lorentzon
photo: Spotify

Spotify is set to more closely compete with Apple’s iTunes and iTunes Store, by upgrading its pay-to-download music features and extending its smartphone and iPod capabilities to more users.

But the changes mean Spotify is ending its deal with 7digital, the much-used digital music downloads distributor part-owned by HMV (LSE: HMV), which operates white label stores for several services as well as its own, which has counted Spotify as one if its key clients since it started powering a la carte downloads for the streamer in March 2009.

“7digital has been a wonderful partner for the past year and a half,” Spotify tells paidContent:UK. “However, in order for us to launch a fully-rounded user experience we need to manage the entire process including the download service.”

Taking on iTunes

Although Spotify was conceived as an unlimited-access subscription online streamer, Spotify’s desktop app already allowed users to play MP3 and AAC from their computer in rudimentary fashion. The new features

  • These tracks stored on computers can also be transferred to iPods via USB and smartphones wirelessly, via a new Devices section in Spotify’s desktop app.
     
  • This feature, previously available to Premium-paying customers only with Spotify’s smartphone app, is now made accessible to Free users.
     
  • Alongside, Spotify is overhauling its own pay-to-download service, which previously completed orders through 7digital, with discounts for bulk purchases.
     

Together, they mean iPod and iPhone users no longer require iTunes, which many users bemoan for bloat, for either content purchasing or library management.

The new features, coupled with this month’s curtailment of its free streaming service, all point to a new embrace of offline, not streaming, territory. They appear designed to try replacing iTunes as the de facto app in which to play MP3s and AACs which listeners either already own or want to go on buying for download.

Spotify CEO Daniel Ek believes getting users to create millions of playlists, effectively turning Spotify in to their music library, is key to the business. To encourage more than just single-track paid downloads, Spotify is introducing a “Buy playlist” button to its new retail proposition, with track prices starting at just £0.50 when bought in bulks of 100 – a significant saving both on iTunes Store prices and Spotify’s previous 7digital pricepoints…

Following the loss, 7digital, at the same time, announced it is updating its own-brand Android app which it, too, now says “acts an all-in-one music player and download store”.

A mixed-model music ecology?

Although we have come to identify particular services with particular models (iTunes: a la carte, Spotify/Rdio: access subscription), these and other moves show digital music services keen to augment their core model with another.

The economics of free, ad-supported streaming are widely considered to be challenged. Just six percent of people would pay over £8 (in the ballpark of the industry’s standard unlimited-access plans with mobile access) for unlimited music, according to new Lightspeed poll of 1,00 UK adults for NMA out today.

But injecting streaming Spotify with the most successful digital model the music business has seen to date (a la carte paid downloads), and making this available to its base of six million active users could prove a worthwhile addition.

It may also have been a stipulation of labels that, prior to Spotify introducing unlimited streaming to North America, it also add this model, which has proved so familiar to them.

Many of the main digital music services are now borrowing models from each other…

  • A la carte iTunes is rumoured to be introducing a remote locker or a unlimited-access service.
     
  • Subscription Spotify is becoming an iTunes-like download store and player.
     
  • Amazon (NSDQ: AMZN) has added cloud streaming of uploaded tracks to its core MP3 retail business.
     
  • 7digital, so well known for powering the MP3 download businesses of companies Tesco and Last.fm, has itself added a “cloud locker”.
     

As each blends in to the other, points of competitive differentiation may become harder to find.

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