Peter Kafka

Recent Posts by Peter Kafka

One Down: Spotify Signs Sony to U.S. Deal

This doesn’t get them into the States, but it gets them a lot closer: Music service Spotify has finally signed with Sony for a U.S. distribution deal. Multiple sources tell me the deal, which has been very close since last fall, is now closed.

I’m told the terms call for a U.S. service that more or less mirrors the one Spotify offers in Europe: A certain number of hours per month of free streaming music, with the ability to pay for an ad-free version, or a more popular one that lets users listen on mobile devices like Apple’s iPhone.

Both Spotify and Sony declined to comment.

The deal doesn’t mean a U.S. launch is imminent for the service, which has been trying to make the leap from Europe for a couple of years, and which missed a self-imposed deadline to make it over in 2010. In order to make a credible offer to U.S. customers, it will need at least two of the three other big music labels to sign on.

And practically, at least one of those labels has to be Vivendi’s Universal Music Group, the world’s biggest music label. So Spotify will need to hammer out a deal with UMG and either Warner Music Group or EMI before we can start talking about a U.S. launch date.

The New York Post reported last week that Spotify was close to a Sony deal.

What’s taking Spotify so long to land in the U.S.? Depends on whom you ask.

Some industry sources tell me the big music labels are genuinely worried that Spotify’s free streaming service will increase the decline of CD sales, which have been dropping for a decade, but still make up the majority of the labels’ revenue.

Others have a more cynical take, though it’s not mutually exclusive: The labels, which have already licensed Spotify in Europe, simply want more cash from the company before they do an American deal. There is also muttering that the labels don’t want to upset Apple, which sells tunes on a track-by-track basis via its iTunes store and dominates the market for digital music.

It’s also unclear how close Spotify is to more label deals. Executives at the service have long been hopeful that getting one deal done would convince the other labels to join up. On the other hand, you could argue that it gives the holdouts that much more leverage.

And in any case, even if Spotify signed two more labels tomorrow, it would still take the company some time to cross the Atlantic, as it prepares a marketing campaign, etc.

It might also be nice for the company to have a new slug of cash on hand, something it would have if it goes through with fundraising talks it has been holding recently.

Spotify CEO Daniel Ek talked to me about some of these issues, in a general and noncommittal way, at our D: Dive Into Mobile conference last month. You can see an abbreviated version of our chat below, or you can watch the whole thing here.


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