Peter Kafka

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Yahoo Sings Along With Spotify — And May Profit, Too

Earlier this year, Spotify rolled out a plan to get its “play” button on a host of Web sites, which let the streaming music service broaden its reach beyond Facebook.

Now it’s making the same move, but with one very, very big Web site: Spotify has a distribution deal with Yahoo, which the portal says will eventually get the music service in front of 700 million users worldwide.

The structure of the Yahoo deal is basically the same as Spotify’s earlier partnerships. Yahoo users will see Spotify links on their site, but will only be able to play music if they’ve already downloaded and opened up Spotify’s software (new Spotify users will still have to sign up for the service using their Facebook login). And Yahoo says it will program a branded app that will show up on Spotify later this year.

There’s an obvious upside for Spotify here, because it needs to reach well beyond the music fans and digerati who have embraced the service if it wants to bump up its user numbers.

What’s interesting to me is one of the upsides for Yahoo: If the company sends Spotify new paid subscribers, it will get a cut of the revenue those subscribers generate, says Yahoo strategy SVP Jim Heckman. “We’re participating in providing content, and we’re participating in revenue as well,” he says. Heckman wouldn’t detail how that payout would work, but did say the companies don’t have near-term plans to share ad revenue.

Has Spotify cut similar deals with other publishers? The most obvious candidate would be Facebook, which has brought the service millions of new users courtesy of Mark Zuckerberg’s “frictionless sharing” plan, but it’s possible that some of Spotify’s smaller partners also get a bounty of some sort.

Spotify spokesman Graham James says the company won’t comment on its financial arrangements.

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