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Page last updated at 12:22 GMT, Wednesday, 29 July 2009 13:22 UK

Spot kicks

Spotify screengrab

By Laura Schocker

The online music streaming service Spotify has been credited with helping a small revival in the British music industry. But it's also changing the way we listen to music.

Imagine a giant jukebox - loaded with millions of pop songs, ready to be accessed in an instant. Imagine said jukebox sitting, virtually, in your living room.

Big deal. What would have sounded like a far-fetched fantasy 10 years ago, is an everyday reality today. The internet is crammed with such services - from Apple's iTunes to Amazon's "MP3" site.

Peter Gabriel
Peter Gabriel's rival We7 site does what Spofity does, but in a browser

Music is everywhere online, but mostly subject to one huge caveat - it costs. Those who don't pay tend to steal it using one of the numerous unofficial file-sharing download sites. It's a trend that has been credited with bringing the music industry to its knees.

But internet users in the UK and a handful of other European countries have been exploring a third way in recent months. The free, legal, on-demand music streaming service - the most talked about is Spotify.

Last week, music industry experts were mildly encouraged to discover that after years in decline, the overall size of the British music industry grew by almost 5% in 2008. And Spotify was one of the services credited with helping arrest the decline.

Spotify began in Sweden in 2006 as a downloadable desktop application allowing anyone with a computer to search for and then stream from a selection of about five million songs. It is available in free or paid-for versions - the former inserts a 30-second advert every few songs, while premium users get their music uninterrupted for a £10 monthly subscription. Artists receive a royalty.

It's not the only such service available. We7, set up by pop star Peter Gabriel, has a similarly large catalogue and operates through a normal web browser. Each song is prefaced by a brief advert. Music-based social networking site LastFM, which also offers streaming, also has a big following.

Remember the album?

But it's Spotify, which claims two million users in the UK, that has been grabbing the headlines of late. And, for those who have always preferred to stay on the right side of the law when it comes to music online, there's anecdotal evidence it's changing the way people are listening to music.

Now everybody is downloading songs one by one, but Spotify has changed that because you have access to a whole album
Spotify fan Sean Flynn

"It's a handy tool for testing out music that you're not that familiar with yet," says Jim Edwards, an artist from Newcastle who signed up for the free version about four months ago. "I have music on all day."

Whereas Apple's iTunes, the biggest of the music download services, only allows users to preview a 30-second snippet of a song to decide whether or not they like it, Spotify allows users to listen to whole songs, whole albums, again and again.

Julie Wright, of London, who has been using Spotify for about two months, as a free subscriber, says it's a useful money saver in these straitened times.

"Because you're watching extra spending, you want to be very careful about what you buy," she says. "You don't want to buy an album you'll end up hating." But she admits she has yet to convert her listening into an actual purchase.

The ability to sample at will is one of the big selling points, says Anders Sehr, Spotify communications manager.

"If you read something from a critic in the newspaper in the morning, you can go home and listen to it right away in the evening," Mr Sehr says. "This has really changed the way people can access music."

Serious holes

It's not just new music, either - with millions of songs, listeners can rediscover old favourites. "I can get music from the past that I haven't even thought about," says Sean Flynn, a masters student in London, who signed up about two weeks ago and uses Spotify to browse 90s rap music.

Record player groovsters
Some users say it has reacquainted them with listening to albums

And the music isn't the only thing that's a blast from the past - it's the approach, too, according to Mr Flynn. "Remember when you used to have actual CDs and you used to know every song? Now everybody is downloading songs one by one," he says. "Spotify has changed that because you have access to a whole album."

Whole album, maybe, but there are some notable holes in Spotify's catalogue. While the site is adding an average of 10,000 new tracks every day, big selling artists like Pink Floyd, Metallica and Led Zeppelin have yet to grant licensing rights to their music.

And while it may be changing listening habits, is Spotify as revolutionary as has been suggested? Mark Mulligan, vice president of Forrester Research, thinks not.

"In many ways, Spotify doesn't actually do that much which hasn't been done before," he says. "It just delivers a really easy-to-use, good service."

A lack of design sophistication and clutter is the key to the program's success, Mr Mulligan says. And, he adds, the basic approach allows people to quickly search for and stream free, on-demand music.

The simple design - which some users compare to the iTunes layout - is no accident, says Mr Sehr.

US lock out

"We want to focus on ease of use, simplicity and speed," he says. The name comes from the company founders' hope to allow users to "spot" and "identify" good music.

File sharing site
Spotify is said to have cut illegal downloads

"People don't want to spend time learning new programs," says Mr Sehr, explaining that if they know how to use iTunes, catching on to Spotify is simple. "As soon as you get it up and running, you have an idea of how it's going to work."

But changing the way people access and listen to music doesn't necessarily mean Spotify is an easy fix for the music industry, says Mr Mulligan.

In 2007, 20 illegal tracks were swapped for every one legal track sold, according to the International Federation of the Phonographic Industry. And while sites like Spotify can help, they're not the "holy grail", warns Mr Mulligan.

Perhaps the most basic limitation at this point is that streaming music doesn't replace downloads that can transfer to portable music players. Though an iPhone application, announced earlier this week by Spotify and waiting on Apple approval, may allow users to download a cache of music, it's not the same as having every track at your fingertips.

And while the ability to sample new tracks on streaming services may reduce the amount of total time spent on illegal piracy sites, Mr Mulligan says, people still want on-the-go and on-demand music delivered directly to their earbuds. "I do not think Spotify is anything near a replacement for file sharing," he says.

Another big question for Spotify is whether its business model can sustain long-term success. According to Mr Sehr, the company has yet to turn a profit, but they are hoping to do so by the end of this year or early next year.

Even with revenue from the advertising version doubling each month, Mr Mulligan says the company needs to convince users to pay the monthly subscription rate to be viable. The iPhone app, which would only be available to premium users, may just be one way to do this, says Mr Sehr.

And then there's the US question. At the moment, the US has big streaming services such as Pandora (which is inaccessible to UK users) and MySpace. But the potentially huge American audience is locked out of the Spotify party, finding itself in "the unfortunate position of being the big audience," says Farhad Manjoo, technology columnist for Slate online magazine.

"It probably is easier to get licensing to do these kinds of things outside of the US."

While he's waiting for an American Spotify, Mr Manjoo has used a proxy server to download and try out the service. Though it may not yet be meant for American ears, so far, he likes what he hears. "As far as I know, it is better than everything that is available," he says. "It's easy to understand and easy to grasp."

Add your comments on this story, using the form below.

I have been using Spotify for a couple of months, I can't rate it highly enough. As a musician I have used it to find tracks that I would not have known about and unusual covers by many artists I also have never heard of. I have created playlists that I share with my friends, and can just copy a Spotify link to a track and immediately my friends can listen. I have considered the subscription, but as yet the adverts don't bother me enough to fork out the £10/month subscription, although I would consider buying a day pass for 99p if I was having a party. In short I think Spotify has the right idea, simple interface, plenty of tracks, just need the rest of the record companies to sign up now.
Paul, Gosport

I don't think Spotify will change the way people download their music, even with a mobile platform - It is not the same, you need to be connected to a network of sort kind to use it, while just downloading songs legally, or illegally will allow you to access it anywhere.
Pushkar, London, UK

The only downside I've found so far since I discovered Spotify about 2 months ago is that I can wallow for hours in nostalgic listening and end up humming 60's and 70's tunes to the annoyance of everyone around me.
John Sniadowski, Milton Keynes

One of the revolutionary things, in my opinion, is the idea of collaborative playlists. I have one on my Spotify I share with my friends, quite simply named "Choons" which we all add songs we believe the others will like. It's helped me discover all sorts of music I'd never give a second listen to! The whole 'social' element is what sets Spotify apart from other online streaming services. You can copy the Spotify link of a track, artist or playlist you think is great and share it with friends via email, instant message, or the social networking giants! I've been using Spotify for a good 5 months now and I listen to it all the time at work, and quite a bit at home. I know a few people who've told me it's actually kerbed quite a bit of their 'questionable' music downloads!
James Harland, Maidstone, Kent

Spotify is an excellent tool, and I have used it to test out albums before purchase. It is, however, not quite as good as the "idea" of Lastfm. I briefly used Pandora about 2 years ago, and it was excellent. I discovered bands like British Sea Power who I wouldn't have otherwise. When Lastfm arrived, I thought it would be a good replacement, but it just isn't. It plays a lot of very well known tracks and tracks that do not go well - just because they are both described as "indie", does not mean that someone who likes Bloc Party will like Kings of Leon.
Tom, Twickenham, UK

Thanks to Spotify's free service I am blissfully storing up all those old tracks I wished I had bought when I was younger but couldn't because it would have cost a bomb. And the occasional advert is no bother at all.
Brian Samuel, Halstead, Essex, England

I have used spotify occasionally but found the service very patchy in terms of quality. I cannot see how this will stop file sharing as it is very easy for anyone to "rip" a streaming file into MP3 format and then distribute via fileshares which means the revenue for both artists and Spotify will fall away
Cliff, Chester UK

I tried Spotify a month or two ago based on all the hype - and while the principle and the interface is really good, the choice of tracks/artists is - as your article points out - somewhat limited, when bands such as Led Zeppelin and Pink Floyd are not represented.
Ian Hill, Reigate

There have been subscription music services available for a long time. Particularly Rhapsody and Napster (subscription version not the original file sharing Napster). I subscribe to Napster in the UK and both these services have been available in the US for years. They certainly haven't stopped file sharing and neither have they set the world alight.
Marcus Thornton, Huddersfield

Spotify isn't just loaded with pop songs, it has everything. I love it. I really don't mind the ads either - it needs to survive and I want to hear good music for free. The ads that I hear are chosen depending on what I'm listening to. That makes a lot of sense.

In terms of the iPhone app, I'm all for it, and I think Apple are pressurized into allowing it after the Windows Browser saga. I am prepared to pay £9.99/year, as you will hopefully get a lot more songs out of it than if you spent £9.99 on iTunes.
Kenneth Watt, Aberdeen, UK

Having used Spotify now for about 5 months and not having purchased music (that was not on vinyl) for about 9 years, I actually purchased an album I heard on it last week. It is a shame however that Spotify did not get the credit for the purchase (and maybe part of the revenue generated) as I had to search online for the album because the buy it now links were not working. Fantastic product, cant wait for the iphone version.
Dan, Essex, UK

Spotify could be a great source of income to artists but, like so many music sites, they seem to have set the price of their paid-for service way too high. Surely there is some middle ground between free and £9.99 per month? I would expect them to get much more revenue at, say, £5.99 a month - that just sounds so much more palatable. And it's still a decent income to feed through to artists.
Ben, London

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