Music Streaming Service Spotify Inks Deal With Germany’s Deutsche Telekom In Telco’s Wider Media Push

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Add one more distribution partner to Spotify’s list as it seeks more scale for its music streaming service to make it more profitable: Deutsche Telekom, owners of T-Mobile, says that beginning in October, it will be making 18 million tracks from Spotify available to its 35.4 million customers in Germany, with the data usage associated with the streaming not counting against subscribers’ data limits. The agreement is part of a larger push at the German operator to expand its media operations around the IFA consumer technology show in Berlin this week.

The Spotify deal sounds similar to one that the music company has with Virgin Media in the UK, in which the cable operator bundles Spotify with its premium subscriptions and makes it available over its connected TV service, as a way of driving more subscribers to its pay-TV service.

As part of its third-party platform growth, Spotify has also signed a deal with Yahoo in the U.S. to be its default music provider. Other deals with service providers include SFR in France and KPN in the Netherlands.

In the case of today’s news in Germany, DT says that it will be offering subscribers the option to upgrade to a new monthly data rate of €30 per month to use Spotify Premium across their smartphones, tablets and PCs for offline and online streaming. Those who have existing plans can add a Spotify extra for €10 per month.

That effectively makes this the same price as a Spotify Premium account if you were to purchase it directly through Spotify itself. The sweetener here is that if you get it via DT, you can avoid the music streaming data counting against your data limits.

Spotify first launched in Germany in March of this year. It’s seen as a significant market for the company to pick up more users because it is Europe’s largest economy.

Spotify now has 15 million subscribers across 15 countries but it’s not clear how well it’s done in Germany since launching there earlier this year, in competition with a number of other music streaming companies like Rdio, Deezer (both of which only launched months before) and Germany’s own Simfy.

The Spotify app is available for iPhone, Android, Windows Phone, BlackBerry and other operating systems.

In the last year, as Spotify has grown fast, it’s been possibly at a cost to profitability: it lost $57 million on revenues of $237 million in its most recently filed fiscal year 2011 accounts, according to the New York Times.

The implication is that music royalties eat into its margins; hence the need to scale as much as possible to improve the math, or at least its bargaining position with labels.

The Spotify news came out at the same time that Deutsche Telekom was also announcing other content services in its bid to expand its revenues outside of traditional-but-declining areas like voice.

  • An IPTV service, ‘Entertain to go’, is a home and away-from-home video offering that includes access to several channels SAT1, ProSieben, kabeleins and public-law broadcasters ARD, ZDF and 3sat, plus access to an online video store either using your home broadband or your WiFi or 3G subscription. This is also coming as an add-on option at €5 start at the end of this year and can be bought on a month-by-month basis, with the service available as a free trial initially. DT says its aim is to have 2 million people using the service by the end of this year.
  • Meanwhile, it is also announcing its participating in a new mobile group messaging, file exchanging and video chat service called joyn, which will be offered as an iPhone and Android app and will be available as a cross-carrier service, similar to basic text messaging. Operators that have signed on, in addition to DT, are Vodafone and Telefonica, with Orange expected to announce soon, too. The hope here is to build on a strong business in text messaging: last year DT says that it saw 16.5 billion messages sent across its network.