7digital On Spotify: ‘Minimal Impact’ From Loss, Freemium Is Unsustainable

7digital, one of the leading digital music downloads retailers, will see “minimal impact” from losing the contract to sell tracks through Spotify, its CEO Ben Drury tells paidContent:UK…

“We have known about Spotify’s plans to launch their own download store for over a year and we wish them well – it’s further evidence that the iTunes monopoly is being broken.

“It was an obvious step for them, given the restriction of the new five lifetime plays per track, and shows that the freemium model alone is unsustainable. It’s also certainly linked to their forthcoming U.S. launch, which we now expect imminently.

“7digital is not powering the new download offering from Spotify. There will be a minimal impact on 7digital, as we continue to focus on expanding our offering to new customers who want access to music anywhere, anytime, on mobile and connected devices.

“Importantly, customers who have previously purchased tracks from 7digital via the Spotify application will have full access to their tracks through 7digital.com, our mobile site and via our mobile apps for Android and BlackBerry. Previously purchased tracks and albums can be downloaded directly from 7digital.com via a user’s Digital Locker.”

7digital has been Spotify’s digital downloads partner since the streaming music service added an la carte, pay-for-track option in March 2009 – a service it was able to provide thanks to 7digital’s API, which has also powered stores for services like Tesco, Last.fm and the Songbird browser. It had been one of 7digital’s top three such partners, Drury said previously.

But Spotify is taking the facility in-house in the upgrade to its download offering, which is designed to sell users the MP3 equivalents of songs from their playlists at bulk discounts.

“7digital has been a wonderful partner for the past year and a half,” Spotify tells paidContent:UK. “However, in order for us to launch a fully-rounded user experience we need to manage the entire process including the download service.”

HMV bought half of 7digital for £7.7 million in 2009 and the company has since won other contracts including for Samsung and Sony (NYSE: SNE) devices, Winamp and HMV (LSE: HMV) sites themselves.

In 2009, Drury said: “People are still not going to want to spend £10 a month on music; that’s definitely not going to happen.” At last count, Spotify had a million paying customers out of six million active or 10 million registered users – most on the higher, £9.99-a-month tier.