simply tough negotiations with record companies that were causing the holdup, but it could be something altogether more sinister. Apple may be blocking the Swedish company to protect both its iTunes Store sales and also a future streaming model.

CNET, citing sources “close to the talks”, says that Apple is worried that if Spotify launches in the U.S, it could affect MP3 sales which are already flattening, despite Apple being the biggest digital music store in the country. To block Spotify, Apple is fighting in two ways.

The first is to scare to labels that a streaming service won’t make any money. CNET’s Greg Sandoval writes that Apple execs warned the labels at a meeting in Los Angeles that “they had serious doubts about whether Spotify’s business model could ever generate significant revenues or profits.”

That of course, is simple scare-mongering, as Apple surely doesn’t care about record labels’ profits. Sandoval’s sources said that Apple is also worried about free music slowing sales of downloads, and that “it’s tough to sell something that someone else is giving away.”

Spotify is hugely successful in the countries where it is available – Sweden, Spain, Norway, Finland, France, the Netherlands and the United Kingdom – and offers a freemium model. The basic service is free, with occasional audio ads between songs. It’s like the radio, only way less annoying. If you pay €10 per month, you lose the ads and gain offline storage for songs, and can also use the free mobile apps, available for most smartphone platforms. The catalog counts millions of songs from both indie labels and Sony, EMI, Warner Music Group and Universal. Best of all, the songs play instantly when clicked.

Apple is right to be worried. Many people now only use iTunes as a way to manage TV shows and iOS apps, and €10-per-month is cheap. Spotify even has a social aspect which bests Apple’s own Ping, if only because you can listen to any song a friend shares with you, free.

It is almost certain that Apple will be launching a rival streaming service when its giant data-center in North Carolina is finished, and this could be the real reason Apple is trying to block Spotify. If Spotify gains significant market share, then Apple will have to play catchup. If Spotify comes to the U.S and fails to make money, then Apple will have trouble convincing the labels that the streaming model can work. Either way, Spotify is bad news for iTunes.

Spotify crashes into Apple on way to U.S. [CNET]

See Also:

• Spotify Denies Reported Setback to U.S. Launch
• Spotify Takes Aim at iTunes, Befriends Facebook
• Inch-by-Inch: Spotify Now Buying Server Space in United States …
• Warner Won’t Drop Spotify in Europe, But Could Shape U.S. Launch …
• Spotify Updated for iOS4: Ready to Replace iPod
• Spotify Coming to Windows 7 Phone
• Hands-On With Spotify for iPhone: Is iTunes Dead?
• Six Million Songs in Your Pocket: Apple Approves Spotify for …

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Authors: Charlie Sorrel

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