As it stands now, Ping is explicitly about selling music on the iTunes store. Om thinks it foreshadows the future of social commerce, but where else could Apple take Ping, and how far?

Some analysts describe social networking as air, but perhaps the more relevant metaphor is electricity. In this view, companies and sites tap into social networking to create applications or experiences. Right now, Apple is treating social media as electricity to fuel its own shopping and communications applications.

Apple makes its money by selling products and “renting” its distribution channel. It likely won’t hire an advertising sales force, and Apple’s Me.com is a weak collection of fee-based services. I suspect Apple’s more comfortable creating social networking features that enhance its products and marketplaces, rather than building out a free-standing social network.

Standalone social networks like Facebook, Twitter and LinkedIn, then, probably won’t face Apple as a head-to-head competitor for their audiences, advertisers or what they deliver as their core user experience. Apple doesn’t appear to be interested in building a general-purpose social network, a short message broadcasting service, or a professional connections network. MySpace is way ahead of Apple in gathering artists’ pages and a social music audience, but Apple’s ability to drive sales makes it a fierce competitor for label attention.

Those companies, and others like Google, Yahoo and Microsoft, who aspire to provide social media APIs, services and even infrastructure, should cultivate, rather than compete with Apple, especially if they want to reach Apple’s customers. That means they should license or, if Apple’s in its usual DIY mode, integrate their own social networking technologies with Apple’s. By the time you read this, Ping users may be able to find their friends via Facebook Connect.

Read the full post here.

As I discuss in a post at GigaOM Pro, Ping’s lack of integration with other social networks, or even with the web itself, is now its most compelling feature, at least from a strategic perspective. As Om noted in his post on Thursday, Ping is essentially an e-commerce platform for music disguised as a social network. If broadly adopted by iTunes users, Ping could significantly enhance iTunes’ power as an e-commerce engine by adding the element of new music discovery that used to be played by radio.

As Inside Digital Media’s Phil Leigh wrote in a research note Thursday, “New release popularity was suffering because digital music forced a decline in radio, the chief recorded music promotional vehicle of the past sixty years. As radio’s successor, Ping permits 160 million iTunes users to spontaneously join affinity groups enabling them to discover new music and artists from one another.”

How many will actually join such groups is very much an open question, however. Not only is Ping starting with the limited universe of iTunes users (compared to the entire web), but it’s functionality is also restricted. Sharing of music tracks, for instance, is limited to 30-second clips. This is presumably to encourage paid downloads, but it’s potentially off-putting to users. Ping’s lack of integration with other social networks, moreover, could limit time-spent and user engagement. How much time do people spend in the iTunes store compared to on Facebook?

Still, if Apple can build a viable social network-cum-commerce platform on its own terms, apart from the rest of the web, it will give marketers, as well as content owners, one more reason to abandon the browser and other web-based platforms for the safety and commercial friendliness of Apple’s walled digital garden.

Read the full post here

It’s been two months since Rdio’s beta launch, with all four major record labels and indie aggregators including The Orchard and INgrooves on board since its early-June introduction. CEO Drew Larner wouldn’t say how many paying customers have signed up, nor would he discuss its conversion rate from free trials, but since the service is inherently heavily social, it’s apparent that Rdio is gaining some traction as play counts rise and playlists are shared. I’ve been using its Web service daily, and have lived with it on my iPhone for a couple of months. (Disclosure: I’m enjoying a free trial courtesy of Rdio.)

Rdio competes most directly with cloud-based rival MOG — which launched in December 2009, and added a mobile service for Android and iPhone last month — as well as legacy service Rhapsody and mobile-heavy Thumbplay. (If it ever launches in the U.S., the now-comically-delayed Spotify has surely lost potential paying customers to all of them.) I see Rdio sporting an edge in social features and seamless, pop up-free user interface, while MOG still sports a deeper catalog, better customizable radio, and a more feature-rich iPhone app. Rdio promises a revamp of its iPhone app soon (it’d help), and has already introduced more features for Android and BlackBerry handsets. MOG, it’s worth noting, has cleaned up most, if not all, of the glitches I reported in my last post about them; it’s also worth mentioning that MOG doesn’t yet support multitasking while Rdio does.

I’ve been fairly skeptical of the idea that cloud-based services will suddenly prompt people to rent music rather than own it, and have cited several reasons why the new services have left me a little cold. That said, Rdio has just addressed one of my concerns, adding gapless playback for albums whose tracks run together. It works (most of the time) during desktop playback only, but I’m told that mobile is next. While my gripe seemed nitpicky to some, this is actually a substantial differentiator for fans of classical and electronic music, prog-rock, and live albums, among others. Uninterrupted applause to Rdio for dealing with it; it’s passed my test already.

Even if the mobile versions are still a little clumsy at times, Rdio and MOG are inexpensive desktop options that reliably complement the music I already own, while offering superior experiences to free options like YouTube and Grooveshark. I still haven’t seen a service that has everything I want, but Rdio is a fine supplementary service, if not a replacement for music ownership. I’m still waiting for Apple and Google to make their moves in cloud music, but for an avid listener like me, at the very reasonable $5-per-month, all-you-can-stream price point for the desktop, it’d be hard to say Rdio isn’t worth it.

But while Apple enjoys the benefit of using music as a tool to further its lucrative hardware business, all of those other players will have to find a viable business model.

As I discuss in my weekly column over at GigaOM Pro, carriers and record labels have pinned their hopes on music since before the bottom fell out of the lucrative ringtone market, but the track record is a miserable one: Sprint unsurprisingly failed to entice users to spend $2.50 per song when it launched full-track downloads in 2005, and Verizon Wireless’s original V Cast Music was such a debacle that it was overhauled 18 months later and still appears to have few fans. No other premium mobile offering has made much of a dent either.

There is no shortage of reasons for those failures, of course. But the economic flaw in both full-track downloads and cloud-based streaming services is the same: Delivering music to on-the-go users (via downloads or streaming) costs more over cellular networks than it does over the fixed-line Internet. Operators who deliver content over their networks want a piece of the pie, but margins in the subscription-music business are already razor-thin. And as AT&T’s data calculator shows, consumers on a metered billing plan (which soon will be most of us) can rack up usage pretty quickly listening to tunes on the go: Enjoying just one hour of streaming music every day eats up nearly half of the monthly data allotment on AT&T’s high-end plan.

So every player in the value chain will have to experiment with innovative new offerings and revenue streams as they try to monetize their content in mobile. Because only one thing is certain in the world of mobile music: The old business models simply don’t apply.

Read the full post here.

Image courtesy Flickr user mercury vapour.

So how does mSpot compare to the three options I highlighted in May, namely mp3Tunes, ZumoDrive and SugarSync? Overall, mSpot is potentially a better solution to stream your own music to an Android handset, but the low quality bit rate for streaming is sure to disappoint audiophiles – more on that later.

Installing mSpot on my Mac and Nexus One was simple, as was registering for a new account. Like other similar services, the mSpot desktop client can be configured to copy your entire iTunes library (DRM-free only) to the mSpot servers, or the software can monitor music folders of your choosing. As you purchase new tunes for your personal collection or add/modify playlists, mSpot can automatically find the changes and sync them up to the cloud, provided you have enough free space on the mSpot servers. You can also play your tunes from a desktop browser, but I focused on the mobile software.

The Android client is clean and intuitive with four main tabs: Playlist, Album, Artists, Songs. From a player standpoint, the mSpot software is comparable to any third-party media player, and better than the native Android player. Simply tap a song or playlist to get the music started, use the scrubber bar to move through a song or press the buttons to rewind or skip to the next track. I like how you can swipe the album art to navigate through tracks, and there’s an mSpot widget you can add to your Android home screen.

mSpot’s greatest strength is the ability to play tunes from the cloud even when you have no data connection, a shortcoming of nearly all other similar services. Users can configure how much of their cloud music they’d like to store locally — based on 10 percent increments of total available memory — and mSpot can top off your handset with music for offline playback. Indeed, when viewing your phone’s mSpot music library, local tunes appear in white, while cloud titles show in a gray color. A dynamic playlist called “On My Phone” quickly shows which music is available without a web connection. Any tune can be added to a “Quick Playlist” with a button tap, as well.

Even though the offline playback is a desirable feature, I can’t give a Grammy to this software for one key reason — the sound quality is sub-par. Whether streaming or listening to locally stored tunes, the audio range is lacking. A little digging exposed the culprit: the files appear to use a low-quality 48 kbps bit rate, which makes music sound like it’s on an 8-track player. My source music uses a much higher, albeit variable bit rate, so mSpot is clearly compressing the audio data.

On one hand, that makes sense for a mobile streaming application, in order to keep users from going over their monthly data limits, but even the locally stored tunes use the low bit rate. I hope that in the future, mSpot improves the sound quality through a better compression algorithm, or provides a way to stream higher quality versions of source music from the cloud.

My overall verdict? mSpot is worth watching, but not quite ready for prime-time due to the low-quality music playback. For now, I’m sticking with prior solutions such as mp3Tunes. If mSpot address the quality issue, the software will find a permanent home on my Google Nexus One. And if you don’t need to listen to your own music collection, I’d recommend a Slacker subscription, since it too offers cached playback.

Related GigaOM Pro content (sub req’d):

Forget, Syncing, Let’s Put Music in the Cloud!

The timing of Slacker’s news couldn’t be better for iPhone users in the U.S. Just yesterday, AT&T abolished unlimited smartphone plans for new contracts and replaced them with plans capped at 200 MB and 2 GB, although additional throughput can be purchased for an additional fee. With the new caching feature, Slacker subscribers that use iPhones or iPads no longer have to stream music over a capped mobile broadband connection. Instead, they can load up their device with music from Slacker while on a wireless home network or at a Wi-Fi hotspot.

The approval of Slacker 2.0 with the caching feature also signals a continuing change in the iTunes App Store allowing potentially competitive services and software. I first noticed this when Apple approved the Rhapsody music subscription service — many believed Apple wouldn’t approve a music service that could take the spotlight away from the iTunes store — recently estimated to have earned $520 million in the last quarter. Apple’s approval of the Opera Mini web browser is another example, although most iPhone owners don’t seem to be using it.

Either due to worries of potential regulatory action or due to public sentiment on openness, Apple is easing up on competitive apps. Of course, in the case of Slacker, it doesn’t hurt that subscriptions are available as in-app purchases, on which Apple makes 30 percent.

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Forget, Syncing, Let’s Put Music in the Cloud!

Like several others in the marketplace, Rdio -– pronounced “AR-dee-oh” -– promises streaming, cloud-based access to a library of millions of songs for a flat monthly fee. (To learn more about cloud-based streaming, attend Structure, June 23 & 24 in San Francisco) Desktop and mobile access via iPhones and BlackBerrys costs $10 monthly, while desktop-only customers pay $5. That’s an increasingly familiar price point: MOG, which went live last fall and is now preparing its mobile launch, will have the same two-tiered price system, while Rhapsody and Thumbplay both offer desktop-plus-mobile plans for $10; European fave Spotify offers free ad-supported streams and a two-tiered premium plan. (See my report, Spotify Leads the Streaming Music Scene, on GigaOM Pro, sub req’d)

So what’s new? Rdio favors social music discovery via a Twitter-like model based on following other users. Music that’s frequently played among those users turns up in a “heavy rotation” list, a sort of musical version of Twitter’s trending topics. It’s an inherently non-private service, with your listening history as well as your collection of bookmarked songs on display for anyone to scrutinize. That may be a turnoff for some people, but it’s the key to Rdio’s discovery component.

I liked Rdio’s fast-moving, browser-based interface; there’s also a small desktop app that performs seamless playback and inspects your iTunes library in order to populate your web collection. I found the mobile app a little balky, but it survived a road trip test, notably in that since it includes offline caching of songs, I was able to access my favorites while in places where connectivity was sparse. As for the “lean-back” radio element, it’s fairly basic and not terribly flexible, using Allmusic Guide data to construct stations based on a single artist – not trait-based like Pandora or culturally driven like Last.fm, and without the clever slider functionality of MOG.

I’ve already written about some of my frustrations with cloud-based music services, and Rdio doesn’t solve all of my issues concerning interoperability and user experience. While its catalog of almost 5 million songs is growing, it’s still a little spotty –- all four majors are on board, but some but not all major indies are represented. Like its rivals, I see Rdio as a secondary service where I might discover and sample music on-demand, rather than something that can replace ownership of things I like.

Rdio does capably fill the gap between what I own and what I might want to hear but would never pay for — trouble is, not many people have demonstrated a willingness to pay for other cloud music services that do the same thing. (I do believe that paid access models are replacing ownership of music, partly but not completely, and very slowly.) Rdio smartly integrates the better elements of free services –- social connections, discovery, playlisting, radio -– with the paid all-you-can-eat model, bringing everything together into one place in the hopes that people will pony up. It’s a good product that its creators say will become more feature-rich, which is important as Spotify becomes more social and others trick out their services. But while Rdio may be satisfying for a niche of musically curious people, I’m not yet seeing why it would pull away from the pack to become a breakaway hit.

Related GigaOM Pro Content (sub req’d):

• The Quest to Monetize File Sharing
• Spotify Leads the Streaming Music Scene

The company raised $35 million just last summer in a round led by Greylock Capital that coincided with it securing a long-term royalty deal for Internet radio.

These late-stage funding rounds, rather than IPOs, are increasingly common for today’s strong consumer Internet companies, with others like Facebook, Zynga and Groupon recently taking rounds from the Russian holding company Digital Sky Technologies, which included buying shares from early employees and investors. It’s unclear if anything like that happened with Pandora.

Pandora first launched in 2005 and tried a variety of business models before making freemium work (see that story, as told by CTO Tom Conrad, here). The company has more than 20 million uniques and took in $50 million in revenue last year.

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One is MP3Tunes. The web service scans a PC or Mac for music and then uploads the audio files to a digital music locker on the MP3Tunes servers. The client software will even monitor my computer for when I add new music — something I’m apt to do a few times a week thanks to Amazon’s MP3 deal of the day, which offers albums for $3.99 or less. MP3Tunes supplies a 2 GB account for free, so anyone can try it, but a 50 GB locker sets you back $39.95 a year.

I like the flexibility that MP3Tunes provides because my music is available on practically any device I own, no matter where I am. There’s support for both the Android and iPhone operating systems, so I can enjoy the Beatles on my phone when on a run and later kick back to some Enya on my iPad after cooling down. During the day, I often stream music on a Mac or PC while working — great when evaluating a loaner laptop that doesn’t have my music on it. A web interface provides streaming capability from practically any computer. The only downside I’ve noticed is that the Android client isn’t quite stable on my Nexus One, but I’m using a custom, or hacked ROM, on my phone, so that could be causing incompatibility issues. Aside from that, the software offers many features you’d expect in a media player: sorting by album, artist, or playlist; shuffle play; and full album art. Another handy feature is how the player integrates local music files with those stored in the cloud, so you can also enjoy any tunes physically on your device.

A second option, which I’ve used over the past year to stream music from cloud to a handset, is ZumoDrive. Like MP3Tunes, ZumoDrive stores files in the cloud and the corresponding handset client plays them back on demand. The service supports a wider range of mobile phone platforms than MP3Tunes, however: iPhone, Android and webOS all work. And unlike MP3Tunes, ZumoDrive is a full file synchronization solution in that it doesn’t just work with audio files; I routinely use it to store documents, photos and various other files in the cloud. That advantage comes at a price, though. The same 50 GB of storage offered by MP3Tunes costs $9.99 per month with ZumoDrive. If you’re just looking to stream music and have a relatively smaller music collection, I recommend the free 2 GB account or a 10 GB plan at $2.99 a month. Even though ZumoDrive isn’t a cloud service dedicated to music, the player software is much like any other audio client and rivals MP3Tunes in terms of features and usability.

Similar to ZumoDrive is SugarSync’s cloud solution. In my last Weekend Project, I used SugarSync with a third-party document editor to create and edit documents in the cloud on my iPad. It turns out that SugarSync works acceptably as a music player when combined with audio files stored online. I say “acceptably” because while you can navigate to and play music files on a phone with SugarSync, the client software doesn’t yet provide the full experience of a dedicated music player like MP3Tunes — album art doesn’t show and there’s no way to shuffle through various tracks. So it’s a bare-bones solution, but if you’re already using SugarSync to store other files and don’t want to pay for a second service, a workable one. And there’s one more advantage to using SugarSync: Aside from support on Android and the iPhone, there are client applications for Windows Mobile and BlackBerry devices, too. A 2 GB trial account for SugarSync is free while $49.99 per year nabs you 30 GB of storage for music and other data.

There are plenty of other ways to enable remote handset access to a music collection, but those are my picks. And I do anticipate that Apple will provide cloud-based iTunes solution in the future, I’m just not one to wait around. I have solid connectivity most everywhere I go and I don’t feel like synchronizing and schlepping gigs of music on my many devices. Using a cloud streaming solution allows me to keep music in one centralized place and access it on nearly any connected device I use — hopefully, we’ll hear about other similar options at our upcoming Structure event.

There’s a bit of a trade-off with my cloud approach worth noting, however, in the form a of a second or two of “dead air” between songs as they load up in the client buffer, but for me that’s far outweighed by the ability to break free from the physical storage limits of a device. The capacity of my Android handset might be limited by the 16 GB microSD card inside it, but with a cloud solution I can “tote around” and enjoy 30 GB or more of music.

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Forget Synching, Let’s Put Music in the Cloud!

Established as a CD-swapping service in 2006, Lala repositioned itself as a forward-thinking cloud music site in 2007, offering a storage locker for its users’ MP3 collections while selling 10-cent web songs that gave buyers the right to stream tracks as many times as they’d like. It may have been ahead of its time; while relatively few buyers paid for web songs, the shift from owning music files to streaming them from the cloud (GigaOM Pro, sub req’d) appears to be gaining mainstream approval. Apple’s acquisition of Lala last fall augured a future in which the iTunes software allowed us to play songs from the cloud, although the company has yet to describe what that will look like in practice. Will it merely let us stream the song files we possess from any device, or will Lala’s innovative form of ownership — the ownership of a stream, at roughly a tenth the cost of an MP3 — be echoed in Apple’s new project?

Speculative reports have suggested that a new version of iTunes could appear as soon as June, although Apple has yet to reveal any new agreement with major record labels that would allow cloud-based streaming. (Lala’s license was reportedly non-transferable, should the company be acquired.) Any new agreement could involve a messy renegotiation in which Apple would make new concessions to the labels, as it did last year when variable pricing, DRM and bundling formats were in play.

Apple will issue iTunes store credit for Lala web song purchases as well as outstanding wallet balances.

As of today, Midomi has rebranded itself as SoundHound and introduced a new freemium model aimed at challenging Shazam on both free and paid music app charts. The company has also hired away Shazam’s former VP of business development, Katie McMahon, in an effort to execute on a partnership strategy to incorporate its sound-matching search tool into other sites and applications. Its ambitions could also make SoundHound a target for acquisition, since it does something Google and its rivals cannot.

Although SoundHound’s search is imperfect –- it doesn’t really work for strummed chords or harmonized vocals, and it relies on a crowdsourced website for its somewhat limited sing-to-identify database -– it outclasses by far any of the available melody search engines I’ve seen on the web. I’ve used it to identify wordless jazz standards I heard as a child and carried around in my head for decades; it picked them out in a matter of seconds. And it’s faster than Shazam when it comes to identifying recorded music, too.

Its first order of business is taking on its better-known rival by offering more functionality at the same price, with voice search, lyrics and videos built into the app — users can identify five songs per month for free, while a $5 premium app will provide unlimited IDs.

Over the longer term, SoundHound can branch out into other arenas, which I discussed with WaldenVC’s Larry Marcus, an investor in SoundHound parent company Melodis Corp. as well as an early Pandora stakeholder. (Melodis has raised $16 million from WaldenVC, Global Catalyst Partners, TransLink Capital and JAIC America.) The app currently makes money through mobile ads and affiliate sales of songs, but Marcus said SoundHound is exploring deals with carriers and device makers seeking to incorporate search into music apps, as well as extending its search functionality into existing music subscription services. Furthermore, the company is using sound matching to develop an advanced voice search technology that uses the sound of words rather than converting them to text – what Marcus called a “natural misspelling engine” that can also correct mispronunciations. Might Google be knocking on SoundHound’s door next?

The new price point reflects an industry-wide drop in the cost of all-you-can-eat music services, which deliver access to a large library of songs for a monthly fee, even as their providers add mobile functionality. Rhapsody has taken steps to evolve alongside newer subscription services such as MOG and Thumbplay, which offer cloud-based streams to both desktop PCs and mobile devices for about $10 per month, as well as free alternatives. Rhapsody traditionally delivered streams to the desktop, along with “tethered download” files that can be loaded onto certain mobile music players, for about $15, but added cloud-based access through its iPhone app beginning last September.

Rhapsody has also recently renegotiated its licensing fees with content owners, representing more realistic expectations from labels. While confidence in free streaming models is fading, Warner Music Group chief Edgar Bronfman Jr. said recently that the label is increasingly willing to experiment with paid subscription models.

Along with the ownership change and price cut, Rhapsody introduced an application that runs on Android phones, along with a new logo (pictured). Despite the overall reboot, existing subscribers will have to can either contact the company’s customer service department or update their accounts on the Rhapsody web site to sign up for the new pricing plan; otherwise they’ll continue to be billed at the old subscription rate.

Although some of its upstart rivals have garnered more attention lately, Rhapsody is still among the largest subscription providers in the market with more than 675,000 subscribers as of the end of 2009, according to RealNetworks, down from a peak of 800,000 earlier in the year. Competitor Napster, owned by Best Buy since fall 2008, no longer reports the size of its subscriber base, but was last known to have 708,000 subscribers around the time of its acquisition; Spotify recently said it had signed up 325,000 paying customers in Europe, and is still planning a U.S. launch, originally slated for late 2009.

Rhapsody’s spokesman said the company is forecasting profitability by the end of 2010, with revenues near $130 million. RealNetworks invested $18 million in cash as the company was spun out, while Viacom said it will contribute $33 million worth of advertising inventory to promote Rhapsody on its properties, including MTV Networks.

The model, which CEO Claes Loberg calls “engagement advertising,” allows an advertiser to choose specific songs to sponsor along with target demographic groups. Rather than interrupt the experience with a video ad, he says, advertisers can create branded pages that feature dynamic lists of songs with which the brand wants to be associated. Essentially, the model demands that consumers willfully click on a chosen advertiser’s brand name. The advertiser’s fee covers the retail cost of the song file, plus a little more for Guvera itself.

For consumers, the path between a search and a free song file is one of fairly little resistance. If I search for an artist and choose a song, I have to pick an advertiser and visit a “channel” page populated with a list of songs, one of which is the one I want. Although I don’t pay for my track, I’m required to use up a song credit, which can be earned by telling Guvera what some of my favorite things are -– foods, vacation spots and so forth. So by volunteering a bit of personal information and viewing a list of songs with which a consumer brand wants to be associated, I get a DRM-free MP3 at no charge.

Guvera has drawn comparisons to Atlanta-based FreeAllMusic’s service, which is still in private beta. That site offers an MP3 in exchange for watching a video ad of your choice. I’ve enjoyed FreeAllMusic for a couple of months, especially because I know the artists whose music I download are compensated, although I’ve felt little engagement with most of the ads I’ve seen. In fact I’ve already figured out which one of the available ads is the shortest, and I’ve chosen it repeatedly even though it’s hawking a product I’ll never buy. If advertisers are really paying $2 for each video ad impression they serve up as I fill out my jazz collection, in my case, they’re overpaying.

The same may be true of Guvera’s advertisers, who might sway me occasionally but whose pages I’ll probably click on without much thought. Each has a limit: Guvera allows brands to cap the amount they’ll spend on each consumer, making the service less scalable but also better tailored for grabbing a single song than a whole album, which might require more credits than the advertiser is willing to give. In that sense, Guvera plays to the consumer of hit singles first and foremost: Don’t buy the Lady Gaga song, let the hair product maker buy it for you.

Guvera’s U.S. launch is still incomplete. Although the song catalogs are searchable, the channel pages aren’t yet populated, so there isn’t any free music available just yet. (I was able to preview the Australian version early this week, which Loberg said about 50,000 Antipodeans are using.) Also, Guvera has signed up only two of the four major labels thus far, plus indie aggregators IODA and Ingrooves, although Loberg said a deal with a third major is imminent.

The U.S. launch may coincide with the rollout of a revamped version of the product. CEO Daniel Ek told a SXSW crowd earlier this month that a “more connected” edition of the product is on the way, with more social and sharing features; Ek has also outlined ways in which the service can serve as a platform for selling tickets and merchandise as well as providing a direct-to-fan communications channel. The Bloomberg report also says apps for BlackBerry and Palm phones are coming soon; Spotify already has iPhone, Android and Symbian apps.

That sounds great, but a lot can change in a few months. Spotify already faces increased competition as subscription services continue to spring up — each taking a slice of the paying consumer market it will need to capture. Spotify may also have to adjust its own model as content owners’ demands and expectations continue to shift, and Ek has acknowledged that the U.S. model will feature “slight changes” compared to what Europeans currently enjoy. He has insisted that the U.S. version will have a free component, although I have my doubts.

Spotify’s product is terrific, and it has won over investors. Its conversion rate is improving — it’s now about 4.6 percent, with some 325,000 paying customers among 7 million total users — and a Universal Music Group digital executive said in January that the company’s model appears to be sustainable, despite the need for a double-digit conversion rate. But Spotify once suggested it could come to the U.S. by the third quarter of 2009, then aimed for year’s end, and now says it won’t make it out until the summer. Forgive me for wondering if 2011 is a possibility.

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Rankings: Spotify Leads the Streaming Music Scene

So how come I’m still not ready to pay for any of them?

I’m a voracious music listener, one with varied but quite specific tastes and as such, a large collection of albums and songs in both physical and digital form. After taking several different subscription services for a test-drive, however, I found that they provide a good — but still very flawed — experience. Here are five reasons why:

There are still significant gaps in the catalog. As I’ve noted, the services may offer all you can eat, but their menus aren’t always complete, and they keep changing. It’s frustrating to pay for a service that doesn’t have songs you want, and even more frustrating when songs that used to be there aren’t anymore.

I still can’t merge things I own with things I just want to stream. Nearly all music fans have songs in their collections that aren’t on any subscription service. It could be an unlicensed mashup, your friend’s band, the Beatles or Led Zeppelin. But there’s still no subscription service that lets me make a party playlist that includes both Beach House and the Beatles. I choose not to own the former, and I’ve got MP3s of the latter, but I can’t have them both side-by-side. (Spotify, for one, may be working on a remedy for this, but as far as I know it hasn’t gone live anywhere yet.)

Ownership of music still provides a smoother listening experience. Try listening to Pink Floyd’s “The Dark Side of the Moon” or any live album with applause between songs on these services, and you might start wondering where your CD player is. When the next song doesn’t load fast enough to pick up where the previous one leaves off, you’ll hear an abrupt silence –- a major turnoff during album-length pieces with continuous “banded” tracks that run together. When I use iTunes, there’s sometimes an audible seam but no pause, with an option to crossfade; physical formats have no such issues. In this respect, the cloud-based experience can be a degraded one.

I can only share music with fellow subscribers. If playlists are the new mixtapes, as Spotify CEO Daniel Ek said this week at SXSW, I’d like to share them with my friends. In a market as fragmented as music-as-a-service is shaping up to be, playlist sharing won’t be that compelling until we’re all using the same service — or at the very least, compatible ones. This isn’t as big an issue when there’s a free component, as with Spotify and Rhapsody, but in general, until a critical mass of my friends are subscribing, there will be better ways to share. (I miss you, Imeem. You too, Muxtape.) The MP3 file is very flexible; cloud-based subscriptions still aren’t.

I can still hear things that I don’t already own without paying for them. I’ve already got a lot of music, and there are still new records I’d prefer to own, and for which I will happily pay. (You might be very different.)  But I can also hear an awful lot of on-demand free music via both legitimate and legally questionable channels: Hype Machine, Lala.com, Grooveshark, Play.me, YouTube, Blip.fm, FreeAllMusic, BeeMP3.com, Skreemr, MySpace and elsewhere. Pandora and Last.fm help me discover things through a sort of customized serendipity, while the blogosphere provides curated discovery. Yes, an on-demand subscription gives me more, sometimes in a better-quality experience. But for things I might not choose to own, free options are often still good enough. (Remember, more than 95 percent of Spotify’s users think the free version is good enough, too.)

Music subscriptions are improving, and I imagine that most of my quibbles will be dealt with in time. (See my further discussion of the services in this GigaOM Pro piece, sub req’d.) But for now, I still view subscription services as supplementary — not primary — sources of music, and ones that haven’t done much to change my preference for a hybrid of music ownership and free options.

As I said, I’m a voracious music listener with varied but quite specific tastes. And if subscription services’ numbers are any indication, there are millions of subscribers out there who are quite satisfied with what they’re paying for. So I’d love to hear more about how subscriptions work for you -– or don’t.

Post and thumbnail photos courtesy of Flickr user itchy73

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This article also appeared on BusinessWeek.com

Indeed, there are plenty of empty trays at the all-you-can-eat music buffet, though some will leave you hungrier than others. Use one for awhile, and the gaps in its catalog soon become apparent. Try two or more, and the inconsistencies among them become downright baffling.

Most of the services claim to provide access to the full digital catalogs of all four major labels and a slew of independently distributed recordings, most delivered via aggregators such as IODA and the Orchard. But why is MOG missing the first two Tom Petty albums, while Thumbplay has them all? Why does Spotify – at least the preview version I’m testing here in the U.S. – have only two or three Bob Dylan albums, when its competitors have dozens? Why is Rhapsody the only one that has Grizzly Bear’s “Veckatimest,” an acclaimed independent-label album that entered the Billboard chart at No. 8 last June?

As I’ve learned from conversations with subscription providers, obtaining a complete and stable catalog of music is hardly as simple as working out a contract with a label or distributor. Songs and albums are constantly blinking in and out of view as ownership rights change hands, reissues are prepared, and songwriters and performers change their minds as to where they want their songs to be heard. Some labels handle their own distribution rather than going through aggregators, meaning that individual deals have to be struck in order to make their catalogs available. Geography can be a factor, as licenses vary from country to country. What’s more, a glitch in something as simple and unsexy as the file metadata that identifies a song –- a missing capital letter here, a misspelling there –- can render a track invisible to the consumer, even if it’s properly licensed by the subscription service.

Filling holes in the catalog is time-consuming and labor-intensive. (As MOG’s director of content licensing, Buzzy Cohen, told me, “Finding the holes is harder than filling them in.”) Companies with deeper financial resources and more personnel will have the upper hand when it come to chasing down rights holders one at a time in an effort to maintain a more complete catalog, so it makes sense that the older companies are more successful at it than the new ones — and explains why Rhapsody’s service, which has been around for more than eight years, satisfies my searches more consistently than any of its upstart rivals.

Though the causes are manifold and the companies’ efforts to fill the gaps are admirable, it’s frustrating to music fans when our searches aren’t satisfied, and even more irritating when songs in a playlist disappear without warning. And as consumers choose from among several services — or choose not to subscribe at all — holes in the catalog can ultimately be a dealbreaker.

Post and thumbnail photos courtesy of Flickr user samsmith

Related content from GigaOM Pro (sub req’d):

Rankings: Spotify Leads the Streaming Music Scene