Spotify has denied claims it has inked deals with the major Hollywood studios ahead of an expansion into video on demand. Daniel Ek rubbished the report, by Michael Arrington of rumour site TechCrunch, that Spotify had deals in place with four studios.

Not that getting deals signed is any guarantee of progress; Google had them, and lost them, as the reality of Google TV became apparent.

Yet Ek first revealed Spotify's movie ambitions (to this reporter) two years ago – and Spotify has been embedding the software into TVs and making deals with ISPs – neither is new.

Spotify's technology is also vastly superior to its potential rivals in some ways. It would be greeted with relief by ISPs.

Here's why.

The current mania for live streaming of music and video overlooks some huge technical and economic problems in the distribution chain. ISPs hate having to pay for the increase in bandwidth costs that result from the demand for video – without any financial benefit to them. More fool them, you might say, for stubbornly locking themselves into a one-price-fits-all model, and for failing to develop even a basic market of willing payers to offset those costs. Most ISPs would rather put their fingers in their ears than tweak their stone-age pricing.

BT and TalkTalk, for example, have other priorities: chucking a million quid in the UK at a legal challenge to copyright law. Yet their pricing is an economic reality for them for now. Here is where Spotify can offer to help.

Most Spotify users are aware that the client software caches songs, and has a huge appetite for hard disk space. But it's almost forgotten that Spotify was designed as a P2P network: it'll look in other user's caches – and caches close by first. This can save an ISP a lot of money, since the bandwidth costs of traffic within the network are much lower, or non-existent (they've already been accounted for) than shipping bits from outside, or shifting them from a CDN. It's not so useful on 'Long Tail' content, but on popular material, then the bandwidth savings become enormous.

This seems to have been overlooked by TechCrunch, perhaps forgivably, since despite the name, it's not really up on technology.

The chief rivals in the distribution business here are Apple and Google.

Google is also a content delivery network (CDN) now, via the Google Global Cache, or GGC. It's a CDN with Google as its exclusive customer: Google privately caches its video material at peering exchanges; it is possibly the largest CDN by volume in the world.

But Spotify potentially brings the material even closer to the users. Its appeal to an ISP such as Virgin, with whom it is expected to announce a music deal shortly, is obvious. And Spotify has another a huge advantage in the movie distribution business: it's not Google. ®