Spotify, a cheap music-streaming service that has proved popular in Europe, is preparing to launch in New Zealand and Australia.

In Europe, Spotify charges a monthly fee of 5 or 10 pounds (NZ$8.80 or NZ$17.60) for unlimited access to its catalogue of 15 million songs, with that charge depending on the sound quality and features members require.

People can also listen to Spotify for free for up to 10 hours a month if they are prepared to listen to advertisements before each song.

InternetNZ chief executive Vikram Kumar said its impending arrival was "brilliant". "The model of a fixed low monthly fee for all-you-can-eat type services is something New Zealanders quickly need. Bring on [video streaming service] Netflix as well."

Spotify works differently from music download services such as iTunes, in that music is streamed direct to devices such as computers, MP3 players and iPods, rather than being downloaded and stored on the user's device before being played. Subscribers can however still create and save playlists of their favourite music online.

As it is a peer-to-peer service, Spotify has the drawback that if other members want to listen to music that has been stored in a cache on another member's computer, those uploads will count towards the monthly data cap on that member's broadband plan.

Kumar said users should be aware of that, but doubted it would be a big issue for broadband users as Spotify did not involve video. He believed some internet providers might partner with Spotify so uploads and downloads would not count toward customers' traffic caps at all.

Spotify was founded in Sweden and is based in Britain. It is reported to have more than two million paying subscribers, and launched in the United States in July. A policy introduced in September requires new members to have a Facebook account.

The company has not confirmed its local launch, but it has invited New Zealanders to register their interest on its website so they are "first in line" when Spotify launches here.

It is recruiting four staff for a Sydney office, including a public relations professional to deal with inquiries from New Zealand and Australian media.

Music industry blog Digital Media News said Spotify would probably launch locally in February, citing sources in the music industry.