Georgia Internet Law already had plans earlier this week for a post regarding Internet music download service Spotify. The British music listening application has been making significant inroads among United States music lovers this year. It added more than 1,000,000 users the past month alone after creating a licensing arrangement with Facebook.

Among its unique features are that you can listen to, rewind and replay a given track whenever you wish to your heart’s content. Also, the application contains some new social music-sharing possibilities, and the ability to import locally residing files into playlists. Spotify has a pretty far-reaching music library, as well, though not perfect for some obscure tastes.

Many excellent Spotify features were available to-date even on its free service, though that version of the service subjects the listener to some fairly lengthy and repetitive ads. For many people, the “free” side of the equation has so far been more weighty.

With many listeners becoming hooked on this basis, Spotify has elected today to change its roll-out via significant changes to its Terms of Use. Sixth Sense Law brought up the Spotify app this afternoon to find a dialogue box requesting assent to a new license agreement. Being a licensing lawyer, Sixth was interested to find out what was contained (presuming it couldn’t be too good for the user).

The result of initial investigation: the free Spotify service will now only allow the listener to hear a given song five (5) times, period. Additionally, the free version will only permit ten (10) hours of listening time a month. Of course, there are a couple other levels of monthly-fee service available.

Clearly, the company has the right to adjust its business model to remain viable. From a licensing law perspective, Spotify has at least brought its new software license front-and-center for the user’s assent, rather than making stealth changes and hiding behind a “this license may be amended from time to time for any reason without the consent of the licensee” clause.

There are a lot of spoiled customers who will be really displeased, though! At this nascent stage in the early hours of the revolution, there is already a Keep Spotify Free Facebook page. To go from a nearly complete lack of restriction to these ceilings is a lot to swallow for the download devotee.

Earlier this week, Forbes reported that Spotify issued guidance on its 2010 financial statements indicating that it lost approximately $41,500,000 on a pre-tax basis in that year. Royalty license costs (ultimately paid to the parties, artists or otherwise, who hold the rights in the songs Spotify plays) hammered the company despite the fact that it had above-the-line revenue of about $99,000,000.

You don’t have to look to hard to see the impetus for the change in the software license, do you? The effort to make online music profitable continues.  Get ’em lured, and then upsell to the fullest.  How many tries can it possibly take to achieve a business model that vendor and listener can both “subscribe to”?

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