
Spotify is a peer-to-peer client. It's a bit torrent client, cloud-sourcing its media from every Spotify user that is online. This is where they pick up their speed on streaming starts and track changes. Every client, including mobile apps, have a cache which can be adjusted in your preferences. This stores a huge portion of your most played items and if you're a generous Spotify user and have lots of disk space you can up this significantly on your desktop machine.
So what happens is that when you click to hear that new Katy Perry tune, Spotify sources it from all of the other peers out there that have bits of that song cached and BINGO, 200 milliseconds later it starts playing. This is great for the vast majority of popular music but I'm not sure how much performance improvement it gives the long tail. Still, even those deep Root Boy Slim tracks kick off in a heartbeat.
So there you have it. That's why Spotify is an app and not a browser-based service. That's why Spotify is closer to Sean Parker's original Napster legacy than other services. That's why Spotify is inovative. That's why Apple is trying patent this concept... what? Yeah. Even Apple recently filed for a new patent to speed up streaming music by caching portions of the file to your local drive. Good luck with that, Steve.
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