Spotify U.S. Is Probably Launching This Week: What Can We Expect?
Spotify U.S. Is Probably Launching This Week: What Can We Expect?

The long wait could be over this week: According to multiple sources and reports, Spotify will launch in the U.S. this week. Next come the media coverage, the product reviews and the wait to see if Spotify lives up to its billing.

Before the launch, it's worth asking two questions. Will Spotify get tens of millions of registered users - as it has apparently promised potential advertisers it will -- with limitations placed on a free, ad-supported service? And will the enthusiasm seen in the tech community translate to interest in the rest of America?

If Spotify performs as it has in Europe, we can expect 15 million registered users in the first year or so. To attract tens of millions additional users, Spotify absolutely needs a free version. There are two clues that Spotify will include a free level of ad-supported service here in the U.S., just as it offers in Europe. First, the marketing materials for potential advertisers promise a customer base of 50 million in the first year of operations, according to details posted last week at MediaMemo. Not only would a free, ad-supported version be necessary to sign up 50 million Americans, there would obviously be no need for advertisers unless there will be an ad-supported version. Second, the word "free" is right there at "Spotify is coming to the U.S." splash page at "Any track, any time, anywhere. And it's free!"

But the free version comes with an important question: how will users of the free, ad-supported version react to the limits that are all but certain to be in place? Recall that Spotify scaled back the ad-supported version in Europe - fewer free hours of listening and limits on the number of times a particular song can be played. Will Americans put up with those limitations or find shelter in Pandora, YouTube and other unlimited, free services?

Spotify's ability to reach mainstream Americans is also key. It's clear the tech community is eagerly awaiting the launch. San Francisco was the top city for Spotify searches at Google over the weekend, according to Google Trends. This means the tech-heavy market is outperforming compared to larger cities. San Francisco is the 13th largest city in the U.S. (2010 U.S. Census) while the San Francisco-Oakland-San Jose media market is the 6th largest (Nielsen). The next most-active cities for Spotify searches are, in order: New York (the biggest city and biggest media market); Washington D.C.; Milpitas, California; Los Angeles; Sterling, Virginia (the former AOL headquarters where the company still has an office); Chicago and Atlanta.

This brings up a couple of questions. First, to what degree is interest from the tech community genuine interest in the music service, as opposed to general interest about a hot tech company? Second, how will the interest from the tech community (and the media, which is giving Spotify a great deal of attention) convert into interest in the general population?

So how will Spotify perform in the U.S.? A simple estimate replicates Spotify's track record in the seven European markets in which it currently operates: the U.K., Sweden, Spain, France, Finland, the Netherlands and Norway. Those seven countries have a population of roughly 210 million, roughly 10 million registered Spotify users and roughly 1 million paying subscribers.

If U.S. consumers simply mirror the participation of Spotify's European users, we can expect about 15 million registered users and 1.5 million paying subscribers in the first year or so. (To put that number in context, there were 1.5 million subscription service customers in the U.S. at the end of 2010, according to the RIAA.) The U.S. population is roughly 310 million, so U.S. estimates for registered and paying users are calculated by multiplying Spotify's European figures by 1.5.

Of course, there will be factors that could lead to outperform those European numbers. First, any single partnership with a U.S. telecom will give it more marketing reach than any partnership in one or two European markets. Second, a rumored integrated with Facebook could help dramatically expand Spotify's reach. The company's European markets have not had the benefit of integration with the leading social network. Third, the U.S. market is now primed for a company like Spotify. U.S. consumers want more than digital downloads and have reacted positively to quality digital services. They have flocked to Pandora, Netflix and Hulu. They could very well flock to Spotify next.

The wild card is the catalog. In the short term, the service's popularity could be hampered by missing Warner Music Group catalog. It is believed Spotify does not yet have a licensing deal with Warner and there is speculation the service will launch with Warner on board. That could be bad for first impressions and attract media criticism. However, Warner will eventually get on board and Spotify's long-term prospects will be unhampered by its absence at the U.S. launch.