Spotify: A new bounty of free music

This European app streams free music and makes money for musicians.

A Stockholm company has developed a music application that – if you believe the hype – may wipe out music piracy, make Apple’s iTunes largely irrelevant, and even supplant ABBA as Sweden’s most significant pop culture export. It’s called Spotify.

The downloadable gizmo is a virtual jukebox that allows users to listen to almost any song in the world without paying a dime. Legally, too.

With its gray interface, Spotify almost resembles iTunes. But all the music is streamed instead of downloaded – so, the songs are computer-bound and will not transfer to an iPod. As long as listeners are within speaker’s-reach of their PC, the only speed bump is a 20-second ad every 30 minutes. (Alternatively, users can also purchase a premium, commercial-free service.)

Sound too good to be true? Well, for US residents, it is.

Spotify is currently only available in Europe. Negotiations are under way with music labels for a US release. But if Spotify does colonize North America – CEO Daniel Ek tells the Monitor that “it’s coming” – the service may further encourage listeners to view music as an essentially free commodity.

“That’s the culture we live in: Everybody has instant access to so much media, and they expect it to be free,” says Glenn Peoples, senior editorial analyst at Billboard magazine. “It’s important that services innovate and challenge themselves to come up with new and better ways to offer music and pay content holders. If [Spotify] succeeds, then they prove that you can have free music and you can serve all stakeholders.”

The inspiration for Spotify came from another Swedish outfit: The Pirate Bay, whose online buccaneers were recently found guilty of copyright infringement in a Stockholm court. Mr. Ek wanted to somehow legally harness the massive demand for free, immediately accessible material.

His solution: An application that partly streams music from a central server and partly utilizes peer-to-peer (P2P) technology. Essentially, Spotify uses a small portion of user’s computer bandwidth, turning each machine into a part-time server. Spotify also added its own tweak to P2P technology. Whereas traditional P2P only assembles a song after it has downloaded all the constituent bits in random order, Spotify streams each part of a track in sequence to facilitate hiccup-free listening.

Devising the technology was the easy part. After founding Spotify in 2006, Ek spent two years visiting record companies across the world, meeting everyone from janitors to CEOs” in an effort to convince them that the only way to beat piracy is to offer a better product.

These days, record-company executives face the same predicament as a slide-rule manufacturer in the pocket-calculator age. Until recently, the record-label business model relied on the sale of physical products. But even the industry’s late entry into the digital-music market hasn’t compensated for online piracy and the decline of CD sales.

Album sales – whether CD, vinyl, or digital – dropped 14 percent in 2008 and have almost fallen by half since 2000, according to Nielsen retail figures.

“Right now, 95 percent of all downloads are illegal,” says Ek in an e-mail interview, citing a January report from the music trade group, the International Federation of the Phonographic Industry. “We’re looking to take this 95 percent of music fans and bring them into a user-friendly, legal environment where they can get exactly what they want while also contributing money to the artists by either listening to ads, subscribing to the service, purchasing downloads, or, in the near future, buying gig tickets and merchandising on Spotify.”

Desperate, the record companies have signed on. Spotify’s catalog currently spans from ABBA to ZZ Top and is so extensive that even Engelbert Humperdinck fans won’t be disappointed.

Even so, there are a few glaring omissions, such as Led Zeppelin, Pink Floyd, Metallica, and The Beatles – bands that have been historically slow to adapt to digital media. (The Beatles aren’t even on iTunes.)

In the short term, Spotify may boost music sales because its search engine encourages users to sample new music, which they might want to buy to support the band or bring with them when there’s no Internet connection in sight. In some territories, the player links to the 7Digital download store.

One can also share Spotify playlists by assigning each one a URL and then sending those links to friends via e-mail or Twitter.

“Someone sent me an e-mail saying, ‘I’ve never heard of the band Riverside,’ who are a Polish band,” says Andrew Wood, a special-effects artist from Aylesbury, England, and premium Spotify member.

“Subsequently, they’ve listened to all their albums and on the back of that, they’ve gone and bought some CDs.”

Nowadays, Mr. Wood mostly buys MP3s because his “stacks and stacks and stacks” of compact discs felt like clutter. Since Wood streams Spotify from his laptop to his stereo, he only requires MP3s for the two hours of his day when he has no Internet access: his daily train commute. But in the future, when wireless broadband becomes omnipresent, Wood may no longer need his iPod.

“We’re not quite to the point where we can all rely on Spotify for all [our] music needs,” says Eliot Van Buskirk, a technology journalist at Wired magazine. “However, I’ve referred to Spotify on the iPhone as kind of an end game. I think it becomes fairly obvious that once you can create playlists of all the music in the world and access them from your mobile, then at that point, buying music really starts to look like a waste.”

Spotify already has a demo version of an iPhone app on YouTube. The irony that an iPhone app may threaten iTunes surely isn’t lost on Apple. The company might refuse to sell the application.

Such a move wouldn’t be a dead end for the Swedish company. It raised up to $50 million in an August venture-capital drive and the firm hopes to be profitable within a year.

Spotify has also positioned itself to play on other mobile devices and video-game consoles.

If Spotify is to succeed in the US, it will have to ward off several competitors. The popular site LaLa.com, for instance, allows users to listen to any song once free of charge, but then charges for repeat streams of each track. An imminent service, the ad-supported QTRAX, promises free downloads from the world’s biggest labels, though they’ll only be playable on Windows Media Player and not the iPod.

But Spotify’s immediate worry is negotiating music licensing deals with major US record labels.

Ultimately, if Spotify does conquer America, millions of new users may soon echo a famous ABBA chorus: “Thank you for the music.”