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U.S. Labels Unconvinced By Spotify’s Freemium Model

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On-demand music streamer Spotify’s U.S. launch is being held up because labels are concerned too few users may migrate from ad-supported to premium. reports anonymous concerns from three of the four major labels. One exec: “As an ad-supported service, the economics don’t work at all.

“We think Spotify is a great service but they’re going to have to convince us they can convert enough people from free to paid subscriptions to make it worth our while.”

Spotify CEO and co-founder Daniel Ek told Robert last month that Spotify’s planned Q3/Q4 launch would now be more like Q4 or Q12010 – a forecast he repeated at the Monaco Media Forum last week.

There, he said “the U.S. is a different beast” compared to Spotify’s current six active markets in Europe. He acknowledged that the “penny per play” model that gives labels a small payment for each track played via free accounts, would be harder to sell to the American music biz.

The company has always been clear about the size of the task of launching in the States: community manager Andreas Sehr said in September that Spotify was “looking at a slightly different launch in the U.S.”, a country more used to mostly-paid offerings like Rhapsody.

For the uninitiated, Spotify, which has gained a loyal following in Europe and Scandinavia, is an app that, on desktop, looks much like iTunes but streams tunes from the cloud. It’s free with add support or £9.99-a-month ($16.73) for no ads and mobile access.

As a sweetener for the industry, Ek could tweak the freemium model so the free element is much reduced in the States — European free account holders get unlimited tunes but have to listen to audio adverts every five or so songs; a songs-per-day limit may be an aggressive ploy to drive premium sign-ups. Although, that limits the marketing potential of the free service, which constantly reminds users of the benefits of upgrading. If the right formula can’t be found, the service could remain a European-only word-of-mouth success.


Robert adds: In fairness to Ek, he has never made any bones about the fact that Spotify must operate both ad-supported and premium in harmony. “It