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European on-demand music startup nearing $50 mln round for US expansion
Spotify, is another one of the many startups attempting to build a better way for us to consume online music. FT reports the company is nearing a round of up to $50 million from the Li Ka-shing Foundation, which invested in Facebook in 2007, so it can launch in the US. This round could value Spotify at $250 million.
So why is Spotify important? First of all, it has attracted more than 2 million users in the UK and Sweden, in less than a year for some pretty neat offerings.
It runs on two different, but common business models – an ad-free subscription based model which costs users £9.99 per month, or an ad-supported version which is free.
Unlike Pandora, which offers its users customizable online radio along with mobile applications that stream its services to cellphones, Spotify offers users on-demand music through its own proprietary player which users must download. All music lives on Spotify’s servers, and users never download songs.
Spotify is in the same boat as other companies in the online music space, like Pandora. It pays royalties for every song it streams. But to Spotify’s advantage, some of its shareholders include major music labels – Universal, Sony BMG, EMI Music, and Warner Music Group, based on a recent finding by TechCrunch.
The most interesting question to ponder with this deal is whether Apple will approve Spotify’s iPhone appliation. The app allows subscribers to access Spotify’s entire library of over 6 million tracks, through cellular networks, or cache up to 3,333 songs just in case the user has no reception. With an application and subscription like this, who will ever need to purchase songs from the iTunes store again?
As of now, Spotify is not available in the US, but once the investment round clears, we should expect to see it soon. Keep your ears open.
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