Deezer closes in on Spotify attracting more paid subscribers in 2012

A recent report by DigitalMusicNews has shown that Deezer‘s paid subscriber rate is growing faster than that of Spotify‘s. Deezer has seen a grwoth of 114% from December 2011 to December 2012, versus Spotify’s 86% growth. This is surprising, given Spotify’s positioning as the #1 paid subscription music service; however, it’s important to remember what has happened in the past year.

In December of 2011, Deezer announced it was launching internationally at LeWeb – this was around the time people learned it would be launching virtually everywhere but in the US. Following that, Deezer began rolling out in several dozens of countries, in addition to announcing a round of funding of, oh say, €100 Million from Warner Bros Music owner & billionaire Len Blavatnik.

Since then, Spotify has continued to grow, with an equally impressive round of funding; however, their activity in the US has made them the target of scrutiny and attacks by the music industry and media. Reports coming out detailing how the contracts that Spotify had signed made it nearly impossible for them to be revenue positive in the long-run, reports that artists make less than $.01 per track listening on Spotify, making it the least valuable way for an artist to monetize its music, didn’t help its image either. They had a few wins, such as Metallica, the band which notoriously fought against Napster in the early 2000s, announcing their entire discography would be available for download; however, Spotify has become the image of online music services, and thus, had to commit a lot of resources to defending that image.

Meanwhile, Deezer, which operates under similar contracts with labels and has similar ties to the music industry, has left the US out of the equation, attacking all other markets first – and it’s paying off. With paid subscribers at around 3 Million, Deezer lags behind Spotify by about 2 Million subscribers, an amount that could easily be gained in the next year or two, depending on where they go looking for subscribers.

Spotify recently quietly shutdown a paid downloading service in Europe – is this an indicator that they are losing traction on their original European audience; after all, they are originally Swedish. Deezer has maintained solid ground in France, and is slowly taking market share in European countries and else where.

I personally believe that this war will come down to one thing: developers. Both companies launched App Stores in 2012, and the race is now on to see which service can attract developers to create apps to add value to the experience, and turn their platform for music into an ecosystem which relies on the music data they have access to.

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