Key for Spotify in the U.S. is Universal Music

The European music service cut its first licensing deal for a U.S. launch with one of the four top labels--Sony. Can signing Universal help speed up a launch?

For over 18 months, Spotify has hyped the coming of a U.S. service. It now appears that one of Europe's most important digital entertainment companies has a toehold in the United States.

Spotify could put some pressure on the other labels and offer hot acts if signs licensing deal with Universal Music Group, home of Lady Gaga. Greg Sandoval/CNET

Music industry sources have confirmed that Spotify has struck a licensing agreement with Sony Music Entertainment, the second largest of the top-four record companies and the home of such acts as Alicia Keys, the Foo Fighters, and John Mayer. The terms of the deal weren't available.

In October, CNET reported that Spotify, which offers ad-supported music free in addition to paid subscriptions, had moved closer to finalizing licensing deals . And last week, the New York Post reported that Sony and Spotify had all but signed a contract. That's wrapped up now . But the main question is still unanswered: when will Spotify finally launch in the U.S.?

At this point, a Spotify service featuring songs from all four labels appears to be a ways off. If Spotify is willing to risk going out with just two labels, then we might see it sooner. It's risky because many people will be disappointed if they can't find the songs they want on Spotify. Remember SpiralFrog? That was one of the problems that plagued the ad-supported music service that debuted with songs from two labels and was blasted by consumers for offering a library with gaping holes. The company flamed out almost two years ago.

Regardless of whether Spotify intends to go out with two or four labels, Universal Music Group (UMG) is vital. Not only does UMG, the largest of the major labels, feature some of the best-selling artists, including Lady Gaga and U2, but the company also owns the largest market share. A library combining UMG and Sony would give Spotify the equivalent of about 58 percent of music sales. The breakdown of market share for 2010 is UMG at 30.8 percent, Sony Music with 27.4 percent, Warner Music Group at 19.8 percent, indie labels with 11.6 percent, and EMI at 9.6 percent, according to Nielsen Soundscan.

A Universal Music deal would also apply some pressure on Warner Music and EMI.

For its part, Spotify isn't commenting about Sony or any of the deals. The company, which has missed at least two prior promised U.S. launch dates , appears to have learned to hush up until all the contracts are signed. Spotify's spokesman said: "The sensible option is for us to comment when we have a concrete launch date."

Meanwhile, the Midem conference, a huge gathering of the music industry in Cannes, France, starts this weekend. I expect Spotify's troops to make a full-court press there on the labels it still needs.

 

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