The legend of Spotify grows stronger with news that the music service is buying server space in the United States with the aim of launching here in the third quarter of this year. As Spotify CEO Daniel Ek told me at SXSW last week, one likely form Spotify will take when it reaches these shores is as an add-on to your mobile phone or internet service.

Spotify already has seven million users in Europe. U.S. fans without press accounts will soon find out what all the fuss is all about, according to Spotify senior vice president Paul Brown.

"We're buying server space in random parts of the states and there are licensing discussions too," he told Bloomberg.

Ek said Spotify's P2P streaming architecture could be made to work on a set-top box and even a cellphone, and a downstream-only version already runs on iPhoneand Android devices, with mobile apps for Blackberry and Palm in the works. One catch: you have to subscribe (10 euro per month) in order to use it on a mobile device, where up to 3,333 songs can be cached in playlists for playback when your phone lacks a good data connection.

One reason Spotify is so popular in Europe, in addition to its immense catalog, slick operation and easy playlist sharing and collaboration, is that the desktop version is free so long as you don't mind putting up with the occasional image-plus-audio advertisement. According to Ek, the labels should be fine with that model, because after all, iTunes too is a freemium service – the only difference is the labels, musicians and publishers aren't paid when people listen to songs they acquired for free.

Without the unlimited free version, Spotify could end up like Rhapsody's good-looking Swedish cousin. It's main point of innovation is to capture revenue from free music listening, the way iTunes doesn't, but the cost of licensing an on-demand music service like Spotify, which feels like an eight-million-song version of iTunes that loads faster and runs better, is steep. It has traditionally cost about one-penny-per-listener-per-play to play on-demand music in the biggest music market in the world, the United States, and that's a tough habit to support on ads alone.

Spotify has had a note on its website for perhaps a year now inviting cellular and internet providers and connected television manufacturers to explore a potential partnership to bundle the service with devices and data connections, which makes a lot of sense. If Spotify can't be free in America (which it still might be), it might as well feel free, and the best way to do that is to tack a bill onto an existing – and much larger – cellphone, internet, or television bill.

Out of Spotify's seven million European users, 325,000 of them pay the monthly fee that eliminates ads, lets you use the service on a phone, and increases the bit rate of its Ogg Vorbis audio stream. That's a 5 percent conversion rate. When you consider that only 3 percent of the average iTunes music collection was paid for, by Steve Jobs' own estimation three years ago, Spotify's conversion rate from free to paid looks pretty good, and besides, it pays copyright holders when people listen for free.

First, we heard that Spotify was going to launch here by the end of last year, then we heard this spring, and from what Brown told Bloomberg, the new prospective launch date is the third quarter of this year. The big questions — will there be a free unlimited version, and which mobile phone companies, ISPs or television providers will offer a discounted version of the paid service — remain, but these server space purchases are a solid indication that the company's plans to launch here are real.

See Also: