Last updated: September 7, 2011 10:22 pm

Deezer takes on Spotify with Orange deal

Deezer, a French digital music provider, is looking to challenge Spotify in the UK through a partnership with Orange, the mobile network operator.

The tie-up, announced on Tuesday, follows Spotify’s deal with Virgin Media, as cloud music services look to bundle themselves with mobile and broadband providers and device manufacturers.

Boinc, the international cloud music service backed by News Corp, will provide ‘free’ unlimited access to millions of tracks for buyers of certain smartphones and laptops when it launches later this year.

Subscription music services such as Spotify, the European leader, and Rhapsody, its largest US rival, have become popular with dedicated music fans who are prepared to pay about £10 every month for “all-you-can-eat” access to a vast catalogue of legal songs from mobile devices, without interruption from advertising.

To broaden their appeal to a more mainstream audience, such services are looking for partnerships that can lower the monthly cost, by hiding it within a more expensive product or service. These deals typically involve a revenue share which may mean lower margins for the music provider, offset by longer-term contracts and regular income.

Both Deezer and Spotify have been forced to lower the amount of free listening available to non-subscribers in recent months, under pressure from record labels, who are concerned about cannibalisation of other music expenditure, and as they grapple with the low profitability of advertising-supported online music.

Spotify has attracted 1.6m paying subscribers worldwide, largely through standalone subscriptions, although it also has a bundling agreement with Swedish internet service provider Telia and has run free trials with UK mobile network Three.

Deezer, which is most popular in its native France, has attracted 1.2m subscribers, many of them through its previous deal in France with Orange, the largest French ISP, which also owns a stake in the start-up. It unveiled its plans for a UK service earlier this month.

As part of the deal with Deezer, Orange will make available a special mobile-only tariff for pay-monthly customers, to avoid the £9.99 standalone cost of Deezer’s top package.

However, Deezer is still finalising its licensing agreements with record labels and publishers in the UK after a legal battle with Universal, the world’s largest label, in France.

A French court threw out Universal’s complaint against Deezer this week after the digital start-up refused new conditions imposed on its service by Universal, which plans to appeal.

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