Wednesday, May 4, 2011

Spotify's slow-burn challenge to iTunes - Financial Times (blog)

Spotify has just launched a new download service and integration with non-touchscreen iPods, capabilities that have been more than a year in the making.

But Spotify is insisting this lengthy timescale is not another symptom of its tensions with record labels – rather it shows just how difficult it is to create a rival to iTunes for managing music on the go.

The changes add an extra plank to Spotify's longstanding challenge to the digital dominance of Apple. Upping the ante against iTunes comes at an important time, as Apple prepares to launch its own cloud music service – negotiations for which have taken labels' attention away from Spotify's own ongoing efforts to launch in the US.

Primarily aimed the 9m users of its free service, Spotify's new features also coincide with this week's introduction of tighter limits on how much music non-subscribers can listen to. Many free users are still upset about this, if the 9,000-plus comments on Spotify's blogpost announcing the changes are anything to go by. But Spotify maintains the timing is mere coincidence, and that the new features are among its free users' most requested, alongside a proper iPad app (more on which later).

"There was absolutely no connection between this [release] and the limitations we put in a couple of weeks ago," a Spotify spokesperson said. "This would have come out regardless of whether we put in the limit or not."

Moaners about iTunes' growing bloat and general failure to live up to Apple's usually high usability standards will welcome the addition of iPod integration to Spotify's desktop app. It doesn't let you move songs downloaded for "offline listening" but it means Spotify fans with an existing library of MP3s can dump iTunes for good for their iPod nano, shuffle or classic, rather than having to juggle different players for desktop and mobile listening.

The same principle has been applied to Spotify's smartphone app, which is now available to non-subscribers if they want to use it instead of an in-built media player. This is perhaps the most nakedly anti-Apple move in today's announcements, allowing iPhone owners to abandon its iPod capabilities. It also makes it that much simpler for a free user to start paying for the premium service, which remains the only way to stream Spotify's extensive catalogue on-the-go.

Spotify's new MP3 service replaces the white-labelled 7Digital download store, and offers reduced prices if people are prepared to pay up-front for bundles of 50 or 100 tracks. This bulk-buying model won't do any harm to Spotify's cashflow either.

Ben Drury, chief executive of London-based 7Digital, which powers the BlackBerry and PlayBook music stores among many other things and has just released a new Android app, said there would be "minimal impact" on his business.

"We have known about Spotify's plans to launch their own download store for over a year and we wish them well – it's further evidence that the iTunes monopoly is being broken," he said. "It was an obvious step for them given the restriction of the new five lifetime plays per track and shows that the freemium model alone is unsustainable. It's also certainly linked to their forthcoming US launch, which we now expect imminently."

That year-long development effort is unrelated to the tensions with labels which have been blamed for the halving of Spotify's allowance of free listening. Labels will welcome another MP3 service, Spotify said, which makes sense given the rapid slowdown in growth seen in digital download sales lately. The bundling approach is designed to make it easy for non-subscribers to buy entire playlists in one go, of which there are now more than 200m on Spotify.

Many late nights went into unlocking Apple's proprietary system, with each generation of iPod requiring its own particular tweaks to make the process "seamless and simple", Spotify says.

Freeing up that developer resource means that an iPad app could finally emerge in the coming months.

Spotify says a tablet app is "one of our main priorities" and work is already underway, but its experience of setting deadlines for a US launch have taught it not to set any fixed dates for the debut.

Notably absent from today's product announcements were anything about movie streaming, reports of which the company has dismissed in no uncertain terms – for the foreseeable future at least.

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