Spotify hopes to follow its most famous artists by cracking America

Music-streaming service signs up major labels as industry finally wakes up to power of the playlist. Rhodri Marsden reports

When spotify launched in the autumn of 2008, it was greeted with delight by music fans. The idea of a comprehensive, free and legal digital jukebox seemed almost too good to be true.

In late 2009, however, one well-publicised statistic suggested that the dream might fizzle out: 1 million plays of "Poker Face" on the music-streaming service had earned Lady Gaga a mere £108. The music industry was horrified; Spotify didn't deny the story, however, merely explaining that as they brought in more listeners and advertisers, artists would see more money.

It seems that they were right. Spotify paid out a total of €45m (£38.5m) last year to record companies in the seven European countries in which it operates, and this has reportedly persuaded at least two of the four major labels in the United States to strike deals with the service; with one more in the bag a North American launch of Spotify could be imminent. The website TechCrunch reported last week that Spotify is raising a new funding round of more than $100m (£62m), valuing the company at $1bn. And as we migrate to an à la carte form of consuming music, it's putting the listener in control. The contents of our Spotify playlists are, according to industry insiders, becoming the new online musical currency; you may be able to hype an artist in the media, but you can't hype a listener to repeatedly play a song. In this new landscape, financial reward only comes if we keep playing the music.

But just how much financial reward? Spotify reported 750,000 subscribers to its service at the end of 2010; this is split between its £4.99 per month service (which allows you to listen on your computer without seeing or hearing adverts) and its £9.99 per month service (which allows advert-free listening on mobile devices and offers exclusive content). We don't know how that's split; nor do we know how much of the €45m paid out last year came from subscription payments, and how much came from advertising revenue generated by free users. It's this latter question that is exercising the minds of the US music industry as they wrestle with their spreadsheets, but the overall figures are undoubtedly getting healthier.

Data from Scandinavia, where Spotify was co-founded in Stockholm by Daniel Ek, who recently turned 28, and Martin Lorentzon in 2006, indicates that the streaming revenues of record labels there are starting to overtake download revenues for the first time, and that some artists earn as much as 80 per cent of their royalties from Spotify.

Record labels are now focusing on ways of boosting the number of Spotify plays. Last week, the music industry publication MusicAlly reported rumours (unconfirmed officially by Spotify) that the proportion of revenue coming from playlist plays – as opposed to listeners dipping in and listening to a track or an album – is huge. Spotify's tie-in with Facebook means that the act of making a compilation for a friend, once a matter of wrestling with cassette or CD-R, can now be done in seconds – and not just shared with that friend, also shared with the rest of the world.

The entrepreneur and digital media adviser Jeremy Silver foresaw this a decade ago when he created an online playlist service called Uplister. Way ahead of its time, it went under in the aftermath of the dotcom boom, but Silver believes that playlists give meaning to a digital music sphere that has become completely atomised. "Our view 10 years ago was that distribution of music was eventually going to be complete," he says. "All music would be available. So then it becomes about what to listen to, and at that point the playlist becomes the new unit of consumption."

Ultimately, Spotify's potential to change the listening habits of the world is dependent on them filling the gaps in their catalogue to realise Silver's vision of all music available for us to compile, re-order, re-sequence and re-present. While they continue to negotiate with labels, however, we can always make our friends a CD-R or a cassette. That's also illegal, of course, but who's watching?

Spotify: Who's in, who's out...

Jessie J: In

In the latest weekly chart of Spotify's most-played tracks by UK users, the Critic's Choice Brit award-winner led the way with her current single "Price Tag".

Adele: In

"Rolling In The Deep" by the Grammy award-winning 22-year-old from Tottenham, is the second most played UK track in Spotify's current list.

Rihanna: In

The R&B singer from Barbados is currently embroiled in a certain amount of controversy after the banning of the video for her current single, "S&M", in a number of countries. The song was the third most played by UK users on Spotify last week.

AC/DC: Out

AC/DC have refused to sell their music online. Without a glimmer of hope that the band would consider putting its catalogue in Apple's iTunes store, Spotify's chances of getting the tracks are slim.

The Beatles: Out

The lengthy dance between Apple (the tech giant) and Apple (the Beatles' label) to bring the band's catalogue to iTunes finally ended in November. Spotify have no similar name-based issues, but no one is expecting a streaming deal soon.

Arcade Fire: Out

One of a number of acts whose music once appeared on Spotify but now no longer does. No official reason has been given for its removal.

So what's in it for...

The listener

Prior to Spotify, finding specific songs to listen to online was a tedious and often illegal process. Now we have access to a freely available online jukebox – and if advertising annoys you, you can always subscribe.

The bands

To be absent from the world's biggest online digital jukebox is like not bothering to send your records to DJs. The listeners are the new DJs – for themselves and each other – and making your music available to them is becoming crucial.

The labels

Services such as Spotify have been the biggest single factor in reducing filesharing, an activity that has arguably brought the industry to its knees. The royalties may not be huge, but other solutions to the industry's woes are thin on the ground.

Suggested Topics
Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Life and Style
ebookA wonderful selection of salads, starters and mains featuring venison, grouse and other game
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Senior IOS Developer

    £40000 - £45000 per annum + competitive: Progressive Recruitment: My client is...

    SAP SD OTC Consultant | 12Months

    competitive: Progressive Recruitment: SAP SD OTC Consultant | 12 Months | 500/...

    Business Systems Analyst - London - £40,000 plus benefits

    £35000 - £40000 per annum + substantial benefits: Ashdown Group: Business Syst...

    Business Continuity Manager

    £300 - £301 per day + competitive: Progressive Recruitment: The successful can...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice