Now With 2.5 Million Customers, Spotify Tries Patenting Itself

Spotify’s paying customer base has grown by 25 percent (500,000) since Facebook started letting users spurt out their listening habits on September 21.

That is up from the two million it announced in late September.

Some of this growth is thanks to its July U.S. launch and some of it thanks to the Facebook feature, but it’s not clear how much because Spotify, whose core European and Scandinavian businesses were also continuing to grow, isn’t breaking it out.

Reuters (NYSE: TRI) in mid-October said Spotify had found 250,000 U.S. paying customers.

Though it had previously claimed that 15 percent of its active users were paid up, this time Spotify is not updating either its active or total user count, sticking with the last disclosed- number of a total of over 10 million registered users.

How is it possible that Facebook has moved the needle so far on actual paid customers but not for total registered customers? One theoretical possibility would be that everyone who recently subscribed was already a free Spotify user. But that’s unlikely. So we await full new numbers.

Spotify’s 2010 UK-reported losses deepened to £26.5 ($41.23) million on higher spending, but revenue exploded more than four-fold to £63.1 ($98.19) million. Enders Analysis reckons “Spotify’s (recently-introduced) lower usage caps on the freemium tier will help compress total losses in 2011 … despite the US launch.”

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Now that Spotify is proving itself, it is also trying to protect itself, using a software patents system that has become increasingly controversial.

Last month, the USPTO published a patent application Spotify filed in the States in April for a method of setting up a redistribution scheme of a digital storage system.

More importantly, the company has an earlier patent application outstanding for the underlying peer-to-peer content distribution system on which it was so successfully founded in 2008…

Spotify says “existing peer-to-peer systems are unsuitable for streaming” “because data arrives unordered … and it is not possible to start utilizing the received data packets until the final part of the streaming media has arrived”. The patent application says Spotify has cracked this by allowing users to transmit to each other various sub-streams that are efficiently re-assembled.

A U.S. patent application process can take a couple of years. Spotify could be more valuable and able to fend off rival servies powered by similar technology if it is granted the patents.

Janus Friis and Niklas Zennstrom helped pioneer P2P media distribution with KaZaA and later deployed their underlying architecture, PeerCache, on Skype and Joost.