Spotify is a great service, enabling you to use a desktop client to listen to the music you want to hear. Although the desktop Spotify client is basic, it’s simple to set up playlists that include every album a band’s made, or to import tracks from playlists made by friends. Depending on your musical requirements, you can use the service to trial albums prior to purchase, or to effectively create a fully personalised radio station that’s far more specific than the somewhat random tracks spat out by the likes of last.fm.

Despite the simplicity of Spotify, there are things a lot of people (including, sadly, many journos) still don’t get.

Free isn’t necessarily a good thing

Getting all the music you want for free is great. Spotify’s audio quality of roughly 160kb/s is reasonable and the majority of listeners won’t notice that it’s inferior to CDs. However, money has to come from somewhere, because Spotify must pay IP owners when tracks are played. Spotify makes money from the free desktop client via infrequent advertising that pops up every few tracks, and many ads encourage you to ‘upgrade’ to the ad-free ‘Premium’ service (which also has higher sound quality).

Rumblings from the rumour mill suggest this isn’t Spotify trying to gouge money from consumers, but that it’s increasingly an utterly essential component of its business model. With advertising being hard to come by in the current financial climate and Spotify’s payments rapidly increasing as the service becomes more popular, premium accounts will soon become vital for the company’s very survival. The problem is in convincing users to pay £9.99 per month when the free service is so compelling.

Spotify’s expansion is hugely tactical

With Spotify’s recent appearance on mobile devices, many people in the USA are questioning why the service is European-only (not realising that the service is actually only available in just six countries—not the whole of Europe). This is in part down to Americans not being used to technology moving in that direction—for example, iTunes and Amazon music download services started in the US and months later ventured into other territories.

The availability of Spotify is down to three things: the company’s origins, licensing issues and the size of the market. Spotify originated in Sweden, hence local knowledge led to it being available in a trio of Scandinavian countries. The other three countries where Spotify is available—the United Kingdom, France and Spain—were almost certainly targeted due to the size of their markets and existing interest in digital downloads. In other words, Spotify went where the money was likely to be.

There’s no doubt that the USA is the next major target. In fact, the company’s survival—or at the very least any further expansion—will likely hinge on it getting a foothold in the US, and while smaller European countries may eventually get the service, I doubt they’re a current priority (with the probable exception of Germany).

The mobile apps are carrots, not extensions of the existing service

Spotify arrived recently for iPhone/iPod touch and Android. Plenty of people are already complaining that the mobile clients work very differently to the desktop client, and are twinned with a premium account. This isn’t accidental, nor should anyone expect this to change any time soon. As already mentioned, Spotify needs revenue, and so the mobile applications are specifically there to drive more users to subscribe, not merely as a mobile extension of the existing service. (That said, Spotify would do well to provide a limited demo or ‘lite’ version, because that would almost certainly encourage more users with Apple and Android handhelds to upgrade.)

Apple didn’t care about Spotify because it’s not competition

The more I learned about Spotify’s plans in the mobile space, the less I thought Apple would reject the app during App Store review. Fundamentally, Spotify isn’t competition for iTunes. Apple’s store is based around a seriously mass-market download model, largely concentrating on impulse-oriented single-track downloads. Spotify is currently a mobile service that is hugely limited, only usable by a tiny fraction of people with Apple devices.

If Apple had rejected the application, I suspect it would have been in ‘accidental’ fashion (like Tweetie, C64 and Start Mobile Wallpaper Gallery) and it would have subsequently been rush-approved via expedited review. And even if Spotify goes crazy and releases a free version to mobile (thereby screwing up its revenue model), the app is still effectively a radio (albeit a very personalised one) versus a storefront.