Touted as a potential savior to the U.S. music business, the much-beloved European streaming service Spotify today took one step closer to launching in America. How big of a step, however, is not yet known. Already boasting more than 10 million users in seven European territories, Spotify's American invasion has been little more than hype dating back to late 2009.

Yet perhaps there's a light at the end of the tunnel.

The service has signed a distribution agreement with Sony Music Entertainment, according to those familiar with negotiations between Spotfy and the major labels. Yet there was no indication that that the Sony deal would lead to a flurry of additional announcements, and it was unknown whether talks with other labels were near an agreement.

It is still believed that Warner Music Group will continue to take a wait-and-see approach, as it has taken a very public stance against companies that offer free music streaming.

A spokesman for Sony said the company had no comment, and refused to confirm or deny that the deal was done. Spotify representatives could not be reached for comment.

Spotify, the much-hyped European subscription service that still does not have a U.S. release date, unveiled a host of new features today, many of which are designed to make the player a user's destination for hosting and sharing music. Spotify remains available in just a handful of European territories, but has already boasted more than 7 million users, and today's update will bolster their accounts with added social networking features. 

But perhaps the most enticing new addition is what Spotify has deemed "The Library." In short, the feature will scan the music on a user's hard drive -- everything most of us are listening to  via iTunes -- and allow it to be accessed directly via Spotify. With Spotify, a user's long-accumulated collection of music could now stand alongside everything available on the service, creating less of a distinction between the music that is owned and stored on Spotify, and thereby allowing subscribers to use Spotify as a full-on music management service.

Spotify is based on the so-called freemium model, which offers users the ability to stream music with ads at no cost, and premium services are then offered for a monthly fee of 10 euros (about $13). Spotify's premium service streams higher-quality audio files and lets users download and play songs on their smart phones. Users also have the ability to listen to music when not logged into the service, and now will have the ability to access pieces of their entire collection via Spotify's mobile phone applications.

In an attempt to turn up the volume for its all-you-can-listen music subscription service, Rhapsody is slashing its fees Tuesday by as much as a third to $10 a month.

The fee includes the ability for each subscriber to listen to music on any computer, plus one portable device, such as iPhones and assorted MP3 players. It also announced Tuesday that its service is available on smart phones that run Google's Android operating system.

Rhapsody had earlier charged $12.99 a month to stream from the company's catalog of 9.5 million songs to any computer. Adding an MP3 player would raise the fee to $14.99 a month.

Rhapsody kicked off the new pricing scheme as it finalized its previously announced spinoff from RealNetworks, a Seattle technology company that is also in the process of shedding its games division as a separate company.

In documents filed Tuesday with the Securities and Exchange Commission, Rhapsody declared itself an independent company, with Viacom's MTV Networks owning 47.5% of the company, RealNetworks owning just under 47.5% and the remainder split between Universal Music Group and a private individual investor.  

Rhapsody, one of the first to offer online music subscriptions, is trying to avoid the all-too-common fate of Internet pioneers -- that of perishing from all the arrows in its back. Since launching as a start-up in 2001, Rhapsody has ...

I arrived in Austin, Texas, on Tuesday, and spent much of my first two days talking to labels and publishing reps on Spotify, the hit European music subscription service that is seen as having the opportunity to shake up the digital landscape in the U.S. Yet Spotify was expected to arrive in the U.S. in early 2010, and we're approaching spring without a launch date. The story below was co-reported with our tech experts Alex Pham and Mark Milian, and it appeared in Friday's Business section. 
 - Todd Martens

The last time a young entrepreneur executed his promise to revolutionize music with computer software, the industry sued him for billions of dollars.

A decade after Shawn Fanning unleashed Napster, 26-year-old Daniel Ek is generating tidal waves across Europe with Spotify, a company that offers upward of 10 million songs, streamed free over the Internet. The difference this time is that Spotify is a legal service, sanctioned by the music industry -- to a degree.

Ek, Spotify's chief executive, had hoped to launch his service in the U.S. early this year. But he acknowledged that talks with record labels, along with thousands of music publishers and royalty collectors, had bogged down over details. Ek cited the complexity of dealing with numerous rights holders for the delay.

Some music executives have questioned whether Spotify's free, ad-supported service will help the beleaguered industry regain its economic footing. They worry that it could further erode the market for paid music.

Ek declined to detail the sticking points but said in an interview at the South by Southwest music festival in Austin, Texas, this week that Spotify was taking the time to safeguard its contracts with the license holders by anticipating a variety of business models, such as student discounts or special offers bundled with a mobile phone service.

"This is a very, very complex industry," Ek said. "It's an industry that's been in decline for 10 years. They just want to make the right bet."

Spotify, the wildly popular European music service, still has not crossed the pond. 

The Swedish company last year said it expected to rock the U.S. in early 2010. In the weeks leading up to the South by Southwest music festival in Austin, Texas, American music geeks were salivating over the prospect of a launch into the world's biggest music market.

But at a keynote Tuesday at SXSW, Spotify's 26-year-old chief executive, Daniel Ek, told the audience the equivalent of "stay tuned."

"We want to get all our ducks in a row with ... publishers, which is a huge task here in the U.S.," Ek said, citing ongoing efforts to nail down licensing deals with more than 5,000 music publishers and royalty collectors. He added that the company wants to release a new version of its software to "to make Spotify more connected, with easier sharing and management of music."

The short answer to the headline is probably not. In an earnings call this week, Warner Music Group Chief Executive Edgar Bronfman Jr. seemed to put free, ad-supported streaming services on notice. In now much-quoted comments, Bronfman stated that the major would not be licensing content to such services.

"Free streaming services are clearly not net positive for the industry," Bronfman said during the earnings call (read a full transcript here). "And as far as Warner Music's concerned, will not be licensed. So, this sort of get all the music you want for free and then maybe we can -- with a few bells and whistles -- move you to a premium price strategy is not the kind of approach to business that we will be supporting in the future."

The comments have generated speculation that Warner Music Group may not play nice with Spotify, the popular streaming music service in Europe that is set to launch soon in the U.S. Overseas, Spotify boasts 7 million users and content from all four majors, and it's a widely held belief within the industry that the company is targeting mid-March to unveil its U.S. service, timed for the annual South by Southwest interactive and music conference in Austin, Texas. 

Spotify took to its Twitter to clarify Bronfman's comments, stating that WMG "is not pulling out of Spotify" and that "the media is taking things out of context." A WMG spokeswoman declined to elaborate on the record on Bronfman's comments, but did state that no current deals already in place would be affected. 

Spotify, the Swedish music streaming software that's rocking Europe, has huge ambitions. Though still limited to six countries and yet to launch in the U.S., Spotify founder Daniel Ek is setting his sights on America's top music retailer and digital jukebox -- Apple's iTunes.

During a Q&A at the one-day New Music Seminar industry conference at the Henry Fonda Theater on Tuesday, Ek drew frequent comparisons to iTunes, and dropped in a few criticisms as well.

"We want to be the platform where you organize your music," Ek said at the event. "This is the cloud that everyone is talking about."

The "cloud" describes the Internet streaming model that exchanges ownership with convenience. Hulu is the Web's cloud equivalent for TV.

Most Spotify users choose to listen to and organize the software's 8 million tracks into playlists, and Spotify allows them to do it for free. Like iTunes, simplicity is at the top of developers' minds.

In order to cheaply download tracks, cache songs for offline consumption and access music from cellphones, 250,000 people -- mostly in Scandinavia and the U.K. -- are paying 10 euros or 10 pounds per month (that's $13.97 and $15.98, respectively). Other perks include removal of periodic banner and audio ads.

Rather than target what Ek calls "niche services" like Rhapsody and Napster, which charge all users a monthly fee, Spotify seems to be gunning for the big Apple.

A tidal wave is washing over Europe, and it has already begun to transform the digital music landscape overseas. In the next few months, the company expects to make its way to the U.S.

Spotify is a program similar to iTunes that lets users listen to just about any song on demand. For free. The application takes a page from the Google model -- give a fantastic product away and plan to make money from ads.

It also has a "freemium" component -- that is a business model where the cow and milk are free, but the bells and hormones cost extra.

In order to play music on smart phones (including a spiffy iPhone app) or store songs to be played without an Internet connection, users must subscribe to Spotify Premium, a 10-euro-per-month plan. Each subscriber can sync three devices with up to 3,333 songs.

But Spotify has said in prior interviews that it expects the majority of users to stick with the free version. For that reason, U.S. record labels are skeptical, according to a recent story in the Financial Times. Subscription services such as Napster and Rhapsody have failed to attract significant followings.

The Financial Times also claims that Spotify delayed its launch in America due to roadblocks in talks with the labels here. Spotify spokesman Andres Sehr maintains that it's still on track to make its way stateside early next year, as the Swedish company has told Pop & Hiss for weeks.

Because "the U.S. is the largest music market in the world," Sehr said, "it's a long process."

Compared with the back-and-forth with European labels when Spotify was just starting out, this is nothing. "We negotiated with the record labels for two years before we launched," Sehr said.

"We've shown that we're really popular," Sehr said in a phone interview from Stockholm. "There's data, and we see how things work."

"Really popular" might be an understatement. According to firsthand accounts from folks across the pond, Spotify is practically ubiquitous in some circles. Barely a year old, the service hit the ground running in the half-dozen countries it operates in.

We've been testing the software for about three weeks. It blows the doors off of anything on the market and poses a major threat to several music services fighting for attention.