How come the sound quality is better at free services such as grooveshark than high quality streamin in premium spotify? What is the difference between the default flash player that outshine even spotify? Might it have something to do with the Realtek HD configuration that makes spotify sound muffled in comparison?
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David has some good suggestions. Definitely turn off the setting that tries to make the volume the same for all the tracks. That adds further compression and limiting to the sound processing and does not help sound quality.
I've found that the quality of Spotify's source material varies a lot. So when put through Spotify's lossy conversion process using Ogg Vorbis, some music just comes out sounding muffled and flat.
While I haven't used GrooveShark, I have experimented with Rdio. Spotify's high quality streaming mode is, for my ears and my music, a bit better than Rdio. Not hugely so, but it is noticeable.
If Apple's streaming service does indeed end up streaming music with the same quality as music purchases, it is a step or two above Spotify's high quality mode.
Personally, I wish Spotify would provide a FLAC streaming mode. I'd even pay extra for this. It'd be great to have CD quality (or better) music without having to deal with CDs and SACDs and all that :-)