Spotify gains more active users

Digital music service Spotify rolled out new features and said it increased the number of active users at a press event that featured a special musical performance by Frank Ocean.

Spotify now has 20 million active users worldwide, up 33 percent in less than six months. The company counts five million people among paying subscribers, a 25 percent increase during the same time period.

Spotify also revealed it has one million paid subscribers in the United States, that it added a Twitter like functionality that allows users to follow one another, and that the rock band Metallica's music was now available on the service.

The company made the announcements at a splashy New York event on Thursday that included a conversation between Spotify backer Sean Parker and Metallica drummer Lars Ulrich.

Ulrich's appearance is notable since his band was one of the leading crusaders against Napster, the digital music sharing company co-founded by Parker more than a decade ago that was a flashpoint for digital rights and artist compensation.

"We have more in common than the whole thing that happened 12 years ago," said Ulrich about Parker.

Ulrich said the decision to join Spotify coincided with the fact the band now owns its entire catalogs of music.

Spotify, which strikes royalty deals with record labels, has paid more than $500 million to the music industry since its launch four years ago - an amount that has more than doubled in the past nine months. It pays roughly 70 percent of its revenue back to rights holders.

"The more music that gets shared the more money goes back to artists," said Daniel Ek, CEO and co-founder of Spotify.

Spotify is a free on-demand streaming music service that is rising in popularity. People can pay to hear music without interruptions from advertising and the ability to play lists and preferences from any device any time.

The company has struck up a partnership with Facebook Parker is Facebook's founding president that allows listener's to display their music choices on their personal pages.

Streaming music services such as Spotify and Pandora are being carefully watched by the music industry concerned over the royalty payments.

For example, Pandora is pushing the Internet Radio Fairness Act, which would change how royalties are paid to artists. As of now, online streaming music companies like Pandora pay a different rate to license music than say traditional radio companies.

Many of music's most notable names like Billy Joel and Rihanna are opposing the proposed change.

© Thomson Reuters 2012