April 27, 2010 6:01 am

Spotify hopes to challenge iTunes

Spotify, the fast-growing European music service, is making an ambitious challenge to Apple’s iTunes with an important upgrade to its technology.

Many larger tech groups, from Microsoft to Napster, have failed to dent the dominance of iTunes – spurred by the success of Apple’s iPod music player – as the most popular way to buy and to manage music collections on desktop computers.

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Since launching in 2008, Spotify’s application has been used by more than 7m people across Europe to access its library of millions of tracks over the internet.

New features, developed during the past six months, now allow Spotify to absorb a user’s existing digital music collection within the same interface, and synchronise it with mobile devices running its app, such as Apple’s own iPhone. The new software will allow Spotify users to dispense completely with iTunes for the first time.

“Our ultimate goal is to get people to manage their music collection with Spotify,” Daniel Ek, Spotify’s chief executive and co-founder, told the Financial Times.

The venture capital-backed company, valued at about $250m in a fundraising last year, currently has more than 320,000 people paying a monthly €9.99 ($13) subscription, which allows access to music from mobile devices and ad-free listening.

Plans to launch in the US this year have been held up, partly because of some music companies’ concerns that too few Spotify users were upgrading to its premium service.

“The more you engage with Spotify as your primary music player, the more you are likely to pay for it,” said Mr Ek, either by subscribing or by seeing more ads.

Last year, Apple acquired Lala, another online music service, and it is widely expected to add greater internet capabilities to iTunes, such as making tracks available to stream online as well as to download.

Spotify’s update preempts such a shift to “cloud-based” music services from Apple, as well as competing head-on with iTunes.

“We want to move people from the ownership model to the access model,” Mr Ek said.

“We know that this is a huge shift. People are used to owning music – but more and more people are becoming comfortable with accessing music and services in the cloud.”

Other new features include integration with Facebook and Twitter, to allow people to share new discoveries and playlists through social media – accompanied by an invitation to sign up to Spotify – which is intended to boost awareness of the service.

Spotify has become one of Europe’s most prominent young technology companies after launching its music service in October 2008 and is expanding rapidly.

On Monday, Spotify moved its 29-person commercial team to a new office in London. Spotify also has 80 staff in Stockholm and a small team in New York.

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