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Raising Questions On the Inside

Like many brilliant online services doubts remain about Spotify's long term business model and the biggest problem is availability.

For all the plaudits it receives in the UK, Spotify is only otherwise available in Finland, France, Norway, the Netherlands, Spain and Sweden. Big fish like Italy, Germany, Russia and China still haven't been landed, there's no service in South America or Australasia and even a US launch has stalled time and time again.

Equally concerning is the fact Spotify territories are actually shrinking. Spotify Premium had been offered in Austria, Belgium, Estonia, Germany, Greece, Italy, Poland, Portugal, Romania and Switzerland but were subsequently pulled in July 2009. Even UK membership continues to flit between an open sign-up and invitation only. No matter how good your product, if you can't sell it you'll hit a brick wall - at best. Other music services have achieved widespread distribution, so whether the stumbling block is legal or licensing Spotify needs to find a way to match them.

It's classic chicken and the egg, but not being able to sell your service is only important if you have a service to sell and here again Spotify faces challenges. With its library of music now topping eight million tracks that shouldn't be a problem, but Spotify has increasingly been on the end of heavy criticism from its lifeblood: the musicians behind them.

The issue is royalty rates and while they remain a tightly guarded secret, last year one million plays of Lady Gaga's Poker Face over a five month period were claimed to net the performer just $167. Prolific Swedish musician Magnus Uggla also stepped forward to say in six months he'd earned "what a mediocre busker could earn in a day", while record label Junior Racing said it had pocketed just NOK 19 ($3.00) from over 55 000 plays of its artists. Major labels like Warner have also expressed doubts about the streaming music business model and, exaggerated or not, again it needs solving - especially considering Spotify's obvious streaming video aspirations.

On top of this the Libspotify API has also yet to take off, with the rash of expected console and application ports noticeably absent and talk of Spotify's own brand of mobile phones has died away. Meanwhile the pressure builds from rivals with Sky and Microsoft announcing their arrival and Apple's purchase of Lala causing everyone to hold their breath. Stalwarts Napster and Rhapsody are both back with renewed vigour too and young upstarts We7 and Grooveshark are fighting for your attention.

Before we all get too dramatic, however, fundamentally Spotify remains in good shape. Its library remains vast, the expansion into the mobile space has broken new ground and it has attained remarkable brand awareness and customer loyalty. That said, early teething trouble has matured into growing pains and if Spotify is to continue its rapid, brilliant, upward rise and enjoy users screaming out proclamations every time it makes a modest (and long overdue) change it's going to have to start coming up with some much deeper alterations behind the scenes.

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