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I can only wish them luck, it will be interesting to see if this model will be a successful one, since so many similar companies have trouble trudging on. They paid €45 million of licences in 2010 [1], and 2 million subscribers is probably close to €10 million revenue. They also have aggressive advertising.

[1] http://www.ballade.no/nmi.nsf/doc/art2011011911391428493018

Especially since I pay $25 a YEAR for 256bit AAC streaming audio to all of my computers and mobile devices. Spotify is simply too expensive.
"too expensive" for what?

Spotify's draw for me was more than the music selection or quality. It's more than just a streaming music service—I use the playlist sharing/collaborative playlist editing features heavily, and I like the general UI/UX on both iPhone and OSX.

I don't like having a thousand apps on my phone though. It's nice to just go to Apple's Music app and play any song on my library.
So, you pay the equivalent of two traditional CDs worth of music for a year of audio. That sounds like a pretty good deal, actually, even if it is streaming.
iTunes Match, so it's streaming and download.
I love the Spotify iPhone app, but when I've compared their selection to Rhapsody, I find that Spotify is lacking much of the music on Rhapsody. Right now I'm paying the ten bucks a month for both, but I need to curtail that soon. Do I take selection over user experience or vice versa? If they paid 45 million Euro for the number of songs they have, I assume Rhapsody must have paid even more! I think the clear victor here is the music industry.
Rhapsody doesn't have a free version, other than the trial period when you sign up. Spotify does, but has to pay the labels for their usage too. So Rhapsody in all likelihood paid out the the labels a lot less than Spotify.
that's €10 million revenue per month, right?
They paid €45 million of licences in 2010 [1],

Per year.

and 2 million subscribers is probably close to €10 million revenue.

Per month, right?

And may even higher than that, because Spotify Unlimited is Euro 4.99, but a fraction of the subscribers also uses Spotify Premium at 9.99.

Has anyone tried Rdio? I've tried both services (as a paid member) - and I really think I prefer Rdio - even though Spotify tends to get more media coverage. Rdio has a web based player (huge for people that can't install stuff on their work computer). They also have an iPad app, and I find both of their iPhone clients about the same. I haven't tried either of their services on Android... but I'll assume they have the same feature set as their respective iPhone clients.

Rdio also has much better music discovery services.

All in all - I really want to know what the Spotify hype is? (I want to use the best service, so if I'm missing something - please let me know).

I prefer rdio. I prefer their UI and UX and haven't found much problems with their music selection.
I tried them both and settled on Rdio. Spotify has slightly more songs, but it was the focus that Rdio put on discovery that sold me. They didn't just outsource the social to Facebook, which is a huge plus to me. The whole service/design just seems more considered overall.
Spotify is available in Europe as well—Rdio isn't.
I've tried both and I far and away prefer Rdio. The site can be slow at times but the usability and community make up for it.

And the iPad app is phenomenal.

Have tried both and Rdio is way better for discovery. I stick to downloading music though.
While Rdio is definitely better for discovery, I prefer Spotify because of its integration with iTunes. With Rdio, I had to keep opening iTunes if I wanted to play a song that Rdio didn't have. With Spotify, it lists all of my local songs inline with their library, and I can play everything from one app. If Rdio added this, I'd probably switch back, but for now, I'm sticking with Spotify.

In addition, I can sync both Spotify and local tracks to my iPhone, so I only need to use one app on there as well, rather than jumping back and forth between Spotify and iPod.

That's a great point - and I've been using that feature - and didn't realize it until you mentioned it.
This is the main reason I use Spotify as well. MOG, Rhapsody, Rdio, and others all have this problem.

It's not so much integration with iTunes as it is the ability to import and manage non-Spotify music.

I've tried both and Rdio definitely has much better discovery features, but I settled on Spotify for 2 reasons:

1. The ability to mix in my own music. There is still plenty of music unavailable to these streaming services, so I need to be able to sync and listen to my own mp3's.

2. Great desktop client. I just prefer client applications over webs apps when it comes to music. And the Rdio for Mac client doesn't really feel native - it seems like a wrapper for their website

I pay for Spotify, and I'm disappointed in the selection and lack of "radio" mode. No independent music (AFAIK) is on there, so often older CDs of bands are not to be found. I find I have to use turntable or pandora when I want to explore new music, but when I was a mog.com customer, they had a feature for that already.
The irony of this is that I have just cancelled my Spotify account because tracks I have on my playlists have disappeared due to I assume various problems with record labels.

It's utterly annoying when you sit down in the office and the first track you go to is gone.

I love/hate Spotify. I love the product and use it all the time. I signed up for premium after using the free version for one day, so they definitely won me over. What I absolutely hate is they have a huge number of show stopper bugs in the application. Songs don't play, songs go missing, can't get online, etc. Some have been reported over a year ago and still haven't been fixed.

Sometimes you'll get the message "Offline access for this computer/device has been withdrawn", which essentially deletes all your locally saved songs. Spotify limits the number of devices you can have offline access enabled on, but their algorithm is so awful it ends up nuking all your devices. So beware if you're planning on taking a long plane ride and suddenly your entire library disappears.

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On the mac, spotify often fails to play songs for me as well. The problem is an intersection of weird bugs and their lack of support for low volumes.

When Spotify plays an ad and you turn the volume down too low, they pause the ad and show a pie chart of time remaining in the gutter of the app near the repeat controls. They wait until you turn the volume up, where volume is the product of whole computer volume and their in-app volume control, to continue playing the ad.

Now, if you are keeping the volume low, perhaps because you have in-ear earbuds and don't care to be deaf, there is a very confusing bug where an ad won't play at all, and in fact, won't even start playing so you don't see the time remaining pie chart. Instead, you get a yellow flash message that says, "Can't play track" or song or some such at the top. If you double click a track to play it, it just flashes the same message.

The fix is to temporarily increase the volume above their minimum ad volume threshold and then hit the play button in the lower left corner of the app. This reliably fixes things for me.

Snow leopard, macbook pro, spotify 0.6.1.287.g64b130c8