Daniel Ek announces that Spotify will expand to 20 new markets around the world at a New York event.

Daniel Ek announces that Spotify will expand to 20 new markets around the world at a New York event. Photo: Getty Images

Music streaming site Spotify is now available for free on mobile phones, but only in shuffle mode, as people move away from listening to music on computers.

Mobile users can choose the artist they listen to but not the song, unless they sign up for the $12 per month premium service. Spotify's entire catalogue is now also available free on tablets.

The streaming site has been criticised for the low royalties it pays artists – a few hundredths of a cent for each stream – compared with traditional distribution methods such as radio, television and record sales.

Such artists as Thom Yorke and David Byrne have criticised the revenue generated by streaming compared with record sales and downloads.

But Spotify's founder and chief executive, Daniel Ek, has defended the low royalties, saying a stream was not the same as a download.

"Our competitor is piracy ... There are about half a billion people who consume music online today, but of those half a billion the vast majority are not consuming music in a legal way," he said. "We are trying to make the legal experience a much more convenient way of consuming music.

"I think it is pretty clear that you can make real money on Spotify. We see artists making millions of dollars a year on Spotify. And even if you are an indie act there is real money in that."

He claims Spotify has paid out 70 per cent of the $US1 billion in revenue it has earned over the past five years in royalties. But annual revenue of the privately owned company and the amount paid per song remain confidential.

'The advice that I give to new artists is focus on creating the best possible music you can make, because young artists today don't just compete with the 10 songs that are popular right now, they actually compete with the entire history of music," Mr Ek told Fairfax Media by telephone.

He said Spotify planned to increase marketing in Australia next year and was already the most popular streaming service here.

Free versions of Spotify are supported by ads in a model similar to that of US-based competitor Pandora. 

Created in 2006 by two Swedes, Spotify, while labelled the world's most popular streaming music service, has yet to make a profit, unlike its US rival Pandora.

In 2012, the company said it lost €58.7 million ($89.5 million), on sales of €434.7 million ($662.5 million).

On Wednesday Stockholm-based Spotify announced an exclusive deal with Led Zeppelin, hoping to expand its audience reach and entice more music fans onto digital streaming.

"When you look at how music is being consumed, there [are] three big avenues for it: one is in your home, one is on the go and the third is while you are in your car," Mr Ek said. "Up until this moment it has been impossible for someone to try out Spotify on their phone without being a paying customers. The more music you listen to, the more likely you are to pay."

He said Spotify's early popularity was due to people building playlists for free on desktop computers.

"But that listening is not happening on the computer any more, it is happening on tablets and smartphones ... we are already seeing more than half of our users sign up on mobile every day. We see that people are trying to sign up for our product on smartphones, but they get told they cannot use it unless they are a paying customer."

Of Spotify's 20 million users, about 6 million pay $US10 a month for the premium service, or $12 a month in Australia.

Mobile users can add a song to a playlist when they hear it, but cannot store songs on a mobile device unless they pay for the premium service, which provides access to 20 million songs on demand and without ads on all platforms.

Storing songs could cut mobile data costs and network interruptions because people could load up songs on a wi-fi network before heading out.

Spotify has been available in Australia since mid-2012. Mr Ek said he had "absolutely" spoken to Australian mobile operators about bundling its streaming service with monthly bills, but would not confirm any details.

"Australia is a great market for us ... [it] was one of the highest pre-registration countries that we have ever had," he said.

Spotify on Wednesday announced its expansion into 20 more countries, mostly in South America and eastern Europe, making a total of 55 countries.

Competitor Rdio also expanded its service to 51 countries on Thursday, also adding mostly South American countries to its list.

Rdio costs $12.90 per month in Australia and offers a two-week free trial for mobiles. The company saw a recent spike in registrations from its ARIA sponsorship, head of Rdio in Australia Colin Blake said. 

However, high data costs on Australian mobile networks scared too many potential customers. ‘‘The restrictive data plans that you get here in Australia are extremely expensive and not comparable with most western countries,’’ Mr Blake said. Australians were very cautious about using services that require data because of high charges, he added.  

with AFP