10 million users have tuned in to Spotify so far, but only 1 out of 20 pays for it

Spotify is going to announce that it’s hit the 10 million users milestone later this month, according to a “special party” invitation sent to press and partners (image and source: Music Ally). That’s about the same amount of users as there are tracks in its vast music catalog, to put things in perspective.

As you’re no doubt aware, Spotify’s availability is limited to seven counties across Europe, namely UK, Finland, Norway, Sweden, the Netherlands, France and Spain, so it’s not a bad number to boast about.

On the other hand, there’s no indication at this point if that means there are 10 million active users rather than 10 million registered users, which makes a world of difference.

Perhaps we’ll learn more at the event (provided we get a “special” invite, of course).

Last July, Spotify founder and CEO Daniel Ek told Music Week that it had attracted 500,000 users to pay for a premium account (they come in two flavors, actually, with desktop access for £4.99 per month and desktop and mobile access for £9.99 per month). That’s up from 320,000 paying subscribers back in March 2010. Going up, but is it going up fast enough?

Give or take, that means roughly 5 percent of its user base is currently paying for the product, which means there are about 9,500,000 people streaming up to 20 hours of music per month only and putting up with in-stream ads, although no doubt some are simply no longer using the service (anymore).

There aren’t really any solid industry benchmarks to flat out say conversion rates are disturbingly low, but it seems to me that they should be able to double the percentage of paying subscribers. No doubt, the labels would like to see that percentage go up, too.

Maybe a U.S. launch would trigger higher conversion rates, or maybe not, but either way we’ll have to wait until 2011 (or who knows, 2012) to see if that will be the case. And they’re up to some stiff competition in that part of the world too, with giants like Apple, Google, Amazon and even HP duking it out along with startups such as Rdio and MOG.

But don’t let that get in the way of celebrating the 10 million users milestone, Spotify. Clearly, a lot of folks across Europe are listening to you, even if most are doing it for free.

(Hat tip to Stuart Dredge)