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Spotify Said to Offer Ad-Supported Mobile Music Service

Spotify Ltd., the music streaming company, plans to offer a free advertising-supported service for mobile devices in the U.S. and other countries, according to three people with knowledge of the situation.

Spotify will provide details at a press event on Dec. 11 at its New York offices, said the people, who requested anonymity because the plans aren’t public.

The service will let Spotify attract more users who can potentially be converted into paying subscribers, said the people. New agreements with music companies give the Stockholm-based company flexibility to develop additional features, the people said, as it competes with Pandora Media Inc. (P), Apple Inc.’s iTunes Radio and, next year, Google Inc.’s YouTube and Beats Electronics LLC.

Kenneth Parks, chief content officer for Spotify in New York, declined to comment.

With the new service, listeners will select 15 tracks that play randomly with some ads in between, one person said. If the user chooses fewer songs, Spotify will fill the remaining slots, according to the person. Songs will be available for limited plays, requiring users to create new lists.

The new free mobile service requires a constant Internet connection, the person said. Spotify’s paying subscribers can store songs on devices for offline listening and aren’t interrupted by ads.

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The record-company deals also let Spotify expand the free mobile service into new territories, including developing countries, the people said. The company’s existing U.S. mobile service relied on the same statutory license as Pandora, making it subject to fixed royalty rates and programming restrictions.

Pandora, based in Oakland, California, fell yesterday after The Wall Street Journal reported on Spotify’s plans. The shares closed little changed at $29.36 in New York.

Spotify also offers a free ad-supported service on computers and a $9.99 monthly ad-free plan on mobile and other devices.

The closely held company lists more than 24 million active users and 6 million plus paying subscribers. Spotify, founded by Daniel Ek, operates in 32 regions, including the U.S., U.K. and Hong Kong, according to its website.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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