A New Chapter For Yahoo Music: A Deal With Spotify, Replacing Rhapsody

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Here’s an interesting twist for Yahoo, the beleaguered Internet company, and Spotify, the upstart streaming music service that is taking the market by storm: today the two have announced a global deal, in which Yahoo will integrate and promote Spotify’s music service on the Yahoo Media network; and Spotify will get a Yahoo app on its platform. The move shows how Spotify is teaming up with a big, old-school Internet player in an effort to ramp up its user numbers, and how Yahoo is looking to new blood to rejuvenate itself. But it is also a big blow for Rhapsody, which Spotify will now be replacing as Yahoo’s music streaming partner, a spokesperson has confirmed to TechCrunch.

The deal will see Spotify first rolling out to Yahoo Music. Later it will also start appearing in other verticals within the media network, including Yahoo Movies and omg!, says Yahoo. That represents a much wider-ranging agreement than the one Rhapsody had with Yahoo since 2008.

Yahoo says the app that it will create for Spotify’s platform will feature original, music-related content created by Yahoo — artist profiles, musical programs and other features. Spotify has 10 million users of its service. The app is due out later this year, the companies say.

Meanwhile Spotify will be putting its play button — rolled out earlier this year as an API to appear on other third-party sites — on different Yahoo pages “while remaining on Yahoo” — crucial to get those ad dollars flowing for the company. A deal with Yahoo gives Spotify yet more exposure across the wider Internet, and builds on the integration that it already had in place with Facebook.

There were no financial terms disclosed in today’s announcement, but a revealing quote from Daniel Ek seems to imply that this is the doing of the new CEO, Ross Levinsohn, who had been the head of the Media group before his (still temporary) promotion. “We are really excited about the new Yahoo! leadership team and thrilled to partner with them to build great experiences around high quality content,” he said in the statement.

AllThingsD has a few more details on how the deal will work: Yahoo users will see links to Spotify songs but will only be able to play music if they have downloaded and opened Spotify’s software. If Spotify picks up paid subscribers via a Yahoo referral, Yahoo will get a commission. Ad revenue will not be shared, however, according to Yahoo SVP Jim Heckman.

Before taking the reins as CEO, Levinsohn had to grapple with reorganizing that media division, which included taking out much of the staff of Yahoo’s music operation. There were even questions floating around about its viability long term.

Today’s news is a firm sign that Yahoo remains committed to its content services, by picking a partner that is widely considered to be the best-in-class at the moment in streamed music.

The deal is also a win for Spotify, which has picked up 10 million early adopters and music enthusiasts, but now needs to focus on how to target the wider, mass market of users — Yahoo says that its 700 million reach is equivalent to half of the world’s Internet population, so partnering with them is a good start for the Swedish startup to do just that.

It also looks like this could be a big step forward for the company to extend not only in terms of users, but geographies: the company is currently active in 15 markets, but the Yahoo deal could potentially see Spotify appearing in many more.