Rhapsody, Spotify headed for showdown

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Music streaming services look more and more like they'll eventually do to MP3s what MP3s did to CDs, and what CDs did to tapes, and so on. We're still a long way from a paradigm shift, but as the popular European streaming service Spotify makes headway in its mission to invade America, Rhapsody is fighting back, and the future is suddenly quite a bit closer.

First, an introduction to the two services: Both allow you to stream music from your computer. Both also allow you to buy songs in the MP3 format, and both have a variety of bells and whistles involving playlists, social media and mobile devices. The crucial difference is that Spotify lets you stream music completely for free and only charges for its premium service, whereas Rhapsody charges no matter what.

Spotify has over ten million users worldwide, but only 750,000 of them are premium subscribers. Rhapsody, meanwhile, has 750,000 users (all paying, of course).

Spotify has been working to get the licensing rights it would need to open in the U.S. So far, it's worked out deals with EMI and Sony, and just needs to figure out a way to get Universal and Warner on board before it can open. Rhapsody, hearing footsteps, has expanded its free trial from fifteen days to sixty days, presumably in a bid to gather as many users under its umbrella as it can before it gets its first really major competition in the U.S.

You, the music fan, are the benefactor of this mad scramble, because in the two months that you're enjoying Rhapsody's free trial, Spotify will almost certainly have opened here. One of the big problems Spotify has encountered is the way licensing fees work in this country; they do not distinguish financially free play rights from pay-to-play rights.

So, under all the existing models, Spotify would have to pay Sony just as much for every free user playing a Britney Spears song as it would for every premium user. What is unclear is whether the labels have cut Spotify some deal that will allow Spotify to take its existing free streaming option to this country, or if Spotify has made some concession. Possibly it will work the way LaLa (owned now by Apple) used to, where you could listen to anything once for free.

Music streaming sites currently exist as a tiny minority in the overall landscape. But as people move more and more to smart phones and tablets (which are not really designed for on-board storage of MP3s), and Internet connections get faster, more reliable and more relied upon for media consumption, that tiny share will start to grow exponentially. The question is, who will be providing the streams?

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