Spotify Pressuring Music Labels To Cut Freemium Model

Several major music labels have publicly attacked Spotify’s freemium model, stating the streaming service should remove or severely limit free streaming to gain more customers.

It follows a downturn in iTunes and physical sales, with more music listeners moving over to Spotify, Rdio or Pandora. Figures claim over 20 million people are subscribed to Spotify Premium, with another 80 million potentially listening for free.

Several singers have shown distaste for Spotify, including the Black Keys, Adele and most recently Taylor Swift. Spotify claims its free model still brings in revenue, claiming $1 billion (£670 million) was paid out to musicians last year.

Universal Music Group—the largest global music label—is looking for Spotify to reduce the free option to shuffle only. Time limits per day are also options Universal and Sony are looking to add on Spotify and other freemium music services.

This has been brought up before by music labels, but Spotify has brushed it off, claiming its freemium service gives customers the time to trial the service. The issue is free to paid customer rate is not fast enough for some music labels.

Ministry of Sound CEO Lohan Presencer claimed Spotify should remove the free service altogether. This is an idea Apple is applying to its own re-launched Beats Music service, coming this summer.

Having the paid option only has allowed Apple to drop the subscription price to $7.99 (£5.36) per month, instead of the $9.99 per month price Google Play All Access, Spotify and Rdio offer.

It is not clear if the music labels plan any course of action if Spotify does not limit the free streaming, considering for some labels this revenue could be quite a good chunk of the overall income.

The issue is the price of music dropping from a once high price to less than $0.10 (£0.07) on Spotify and other music streaming services. That said, if someone likes the song enough they might make far more than the $1 (£0.99) iTunes price.

Spotify was looking towards an IPO this year, but given the latest moves by the music industry, it is reportedly moving towards a private equity deal with Goldman Sachs for $500 million (£334 million).

SOURCE: Rolling Stone, Financial Times