Spotify takes on iTunes with new music downloads store and iPod syncing

Friday, May 6, 2011

Is streaming music service Spotify a direct rival to Apple’s iTunes? If it wasn’t before, it certainly is now. Today, Spotify is launching its own music downloads store, adding iPod syncing to its desktop client, and opening up its mobile apps to users of its free service.
Today’s changes are a lot to take on board at once, but the central theme is going toe to toe with Apple. Spotify wants its desktop client to be the default music player (and store) for its more-than nine million free users, and it wants its mobile app to be the default music player on their handsets.
The new features will be part of updates to Spotify’s desktop and mobile apps, which will start rolling out to users today. Music Ally was given a demonstration by Spotify’s chief product officer Gustav Soderstrom yesterday in London.
First, the desktop application and iPod syncing. When users get the update, it will automatically scan their hard drive for mP3 files and import them, along with iTunes and/or Windows Media Player playlists.
If they then plug in an iPod classic, iPod nano or iPod shuffle, it will appear in a new Devices section on the Spotify sidebar, while automatically transferring across new MP3 files from the computer, rather than requiring users to choose individual tracks and playlists to sync.
What if people own an iPhone, iPod touch or Android device? That’s the second big change today. Until now, Spotify’s iOS and Android apps have been restricted to Premium paying subscribers – they’re a key reason to upgrade from free. Now those free users can sign in too.
They still won’t be able to stream music from Spotify’s catalogue – that remains a Premium feature – but they will be able to sync and play their own MP3 files in the app. The syncing happens wirelessly too, which is still a feature lacking from iTunes.
Soderstrom said Spotify is not worried about Apple’s reaction to the Spotify client’s ability to sync files with iOS devices – the company stresses that it is not reverse-engineering Apple’s technology as companies have done in the past, but rather is simply using the storage capabilities of the devices much like a USB drive.
The third prong of Spotify’s new features – and the most interesting from Music Ally’s perspective – is the new Spotify download store. It’s aimed at those nine million users of the free service, and is being pitched as a way for them to buy the songs in their desktop playlists in order to sync the files with their mobile devices.
Spotify has built the store in-house, rather than work with an external company like 7digital – its previous partner for download sales through the desktop client.
What’s more, Spotify has negotiated new licences with labels and publishers to sell MP3 bundles – 10 tracks cost £7.99 – just under 80p a track – and there are also bundles of 15 tracks (£9.99 – 67p a track), 40 tracks (£25 – 63p) and 100 tracks (£50 – 50p).
“You’ve been able to buy music in Spotify for quite some time, but to be honest it’s been a pretty bad experience,” says Soderstrom. “You could only buy half the catalogue or less, and if you bought a playlist, you had to pay individual track prices for each song, even though you were buying a lot of music.”
Soderstrom says that the store will cover “100% of the catalogue” – meaning the songs available to stream on Spotify’s premium service – with all four major labels, indie licensing body Merlin and other rightsholders all on board.
He also says that Spotify is NOT taking a financial hit on songs bought for 50p a pop in the £50 bundle, as rightsholders have agreed to the “completely new download licensing structure”.
This contrasts with Amazon’s MP3 Store strategy, where it regularly discounts tracks and albums, but pays rightsholders the same royalty, swallowing any financial disparity in the interest of promoting its store. How did Spotify sell labels on the idea, given that they have previously pushed for downloads to be sold for higher prices on iTunes, rather than lower?
“We spent a lot of time licensing a new structure, which takes time,” he says. “Because we have managed to do successful things with our Premium service, we have enough faith from labels that they’re prepared to try something new. The labels are really excited about it. More than 200 million playlists of music that people really like have been created in Spotify. It’s a good idea to give them a seamless [buying] experience, and a good price on that.”
Encouraging its free users to buy their playlists may also provide Spotify with a new incentive to up its game on the music discovery front. Until now, much of the innovation around helping Spotify users to discover new and interesting playlists has come from external developers like ShareMyPlaylists and (recently) BBCify.
“One of our areas to work at is to become better at discovery, both through our own means and through the community of third-party developers that we have started to see,” admits Soderstrom, describing the process as “walking a tightrope” in terms of fostering innovation from developers while also improving its own discovery features.
Spotify was recently making headlines for placing new restrictions on its free service, including a 10-hour monthly listening limit, and individual track-play caps. Those changes were forced on Spotify by some of its major label partners/shareholders, although not all.
Today’s changes can be seen as a more positive sign of Spotify’s determination to make money from its nine million free users with carrots rather than sticks. But we come back to the unashamed challenge to Apple and iTunes as the big news here. Amid all the focus on Apple v Google v Amazon in the cloud locker space, Spotify is making its pitch to unseat iTunes on the desktop.
Apple’s response – as well as that of Spotify’s free users – will be fascinating to watch.

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