Spotify Hits A Million Subscriptions, But Does It Matter?

Though it is still months away from debuting in the US (if it even does), Spotify has already become the largest subscription music service in the world.

Earlier today, Spotify founder and chief executive Daniel Ek announced via the company's blog that the site had just welcomed its one millionth paying subscriber. This beat the previous record of 750,000 subscribers set by Rhapsody.

Spotify's success is mainly due to the company's business model. Customers have the option of using a free-of-charge service supported by ads, or they can choose to pay a subscription fee to remove the advertisements. Spotify currently has over 10 million registered users, but even with only one million paying customers, the company's subscription revenue has already far surpassed its ad revenue.

The outlook for Spotify is not entirely bright, however, as the company has yet to make any impact in the US and is still seeking agreements with several major record labels. Additionally, many are concerned that the site's royalty payout to artists, which one industry insider revealed contains so many zeros that the current royalty system can't calculate it, will drive away both small and large labels.

Regardless of concerns, Spotify has clearly become a company to watch. There is no official word on when agreements will be reached with stateside labels, but rumors continue to circle that Universal Music Group and Warner Music Group (NYSE: WMG) are currently in talks with the company.