Does Spotify Need $100M To Crack America?

Russian investor Digital Sky Technologies has been on a tear recently, with significant funding going into Facebook, Zynga and Groupon. Now the suggestion, reported by Techcrunch is that the investment fund is preparing to put $100 million into European music service Spotify.

Since the Swedish service first launched in 2009, its raised EUR83 million (around $113 million). But industry watchers believe this extra money will help Spotify launch in the American market.

The service has long said it plans to expand to the U.S., but Spotifys progress has been much slower than it would have led its backers to believe. Although tough negotiations with the major labels has caused most of the wait, the lag between Spotifys announcements and its U.S. launch date has still left critics suggesting the firm is all talk and no action. But things are slowly falling into place: its just landed a licensing deal with EMI, and already has Sony in the bag.

Not everyone thinks that the U.S. market is worth taking on, however. After all, Spotify has made significant progress in Europe with a large and loyal fanbase (10 million or so users and 750,000 paying subscribers) and plenty of publicity. Rafat Ali, the founder of PaidContent.org, is among those who argue that Spotify should focus on serving those users better. And others suggest perhaps it needs to get its busi! ness in order: Helienne Lindvall at the Guardian, who has been one of Spotifys most consistent critics, says the site needs to put more effort into paying artists, not labels, particularly those on independent labels.

But faced with growing competition in the States, including Rdio, MOG and Pandora, it looks like Spotify thinks the best defense is a good offense. Plus, Pandora may soon have access to more funds if its planned initial public offering goes through.

Launching in the U.S. will give Spotify access to the single largest music market in the world (although it is around the same size as the collected states of Europe) and it hopes help it run around the competition. After all, its biggest selling point is that its incredibly simple to use and delivers, by and large, superb quality: I personally think that right now, its superior to anything else around in terms of interface and clarity.

But there is also one other big reason Spotify is so focussed on America: Apple.

The Swedish business has always suggested that Apple is discouraging labels from dealing with Spotify, possibly because Apple plans to launch its own cloud-based services in the future. In Europe, the labels were given a slice of Spotifys equity in return for their compliance perhaps a part of DSTs money, if it turns out to be real, will go to sweetening the deal on the other side of the Atlantic?

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