However, I don’t see Microsoft being able to compete with Spotify in Europe. Spotify is established as the fresh face of Internet music streaming and as such, I think their way in will be the US, where Spotify is still only available to those with invites.
Microsoft will have a much greater capacity to cope with the vast amounts of traffic that heads their way than the Swedish start up, and as such, can corner that side of the market. In Europe though, i think the story will be different as Spotify is very highly regarded by industry commentators.
The other area Microsoft can dominate is money. Spotify is looking for investment and it is yet to be proven whether the freemium model works. MS on the other hand can spread their pockets to cover initial losses and make a greater amount of money through advertising.
I forsee that the Microsoft offering will be a bumbling paid for product which will not match that of it’s rivals, it seems to me as if they’ve seen a gravy train and are looking to jump on it – just look at Zune – so they don’t get left behind what could be a lucrative market as we head out of the recession.