Spotify wants to offer free mobile streaming, asks industry to lower fees

By on February 20, 2013, 12:30 PM

According to several "music industry sources", Spotify is negotiating with major music labels to both renew their contracts and, most interestingly, lower their license fees by a "substantial" amount. The report claims that Spotify hopes to offer streaming to mobiles for free, partly supported by ads, revealing the impetus for the company's cost-cutting request. Currently, Spotify on mobile is limited to paying subscribers only. Spotify has not yet confirmed the report.

Although it may be aiming to launch free-to-stream music for mobile devices, The Verge's sources claim Spotify doesn't have much financial wiggle room when it comes to absorbing costs. About 70 percent of the company's revenue is spent on licensing, 20 percent is spent toward advertising and hooking new subscribers which leaves roughly 10 percent for the company to spend on its remaining overhead. 

Despite claims that Spotify is strapped for cash, we noted last summer that Spotify was the second largest revenue source for record labels, not to mention the recipient of numerous multi-million dollar investments. Some believe that Spotify has difficult times ahead though, in becoming a sustainable, profitable company.

While Spotify remains a wildly popular service, it may soon find itself in an increasingly competitive landscape. Last year, the Wall Street Journal reported that inside sources claimed Apple was negotiating license deals in an effort to create a Pandora-like music radio service. A couple months later, Bloomberg confirmed those rumors. With its new focus on music, the born-again social networking site Myspace may also be hoping to sneak a slice of Spotify's market dominance.




User Comments: 17

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howzz1854 said:

Spotify is and has been doing the right thing. all it needs to do is keep it up. once it has its users locked in, it doesn't need to be premium subscribers. for example, I have over 13 hours of music and playlists with spotify, it's like steam, who wants to switch when you have an extensive collection of playlists already in place. what I hope in the future is, with the bandwidth continue to broaden, for spotify to provide FLAC music format for premium subscribers. I have an high end setup at home with audiophile grade amp and hi-fi headphone, it's just screaming for lossless format.

JC713 JC713 said:

I have used Spotify since day 1 of opening in the US. Phenomenal service, I just wish to use it on my mobile so that I don't have to transfer songs from iTunes.

2 people like this | Skidmarksdeluxe Skidmarksdeluxe said:

We don't have spotify in my country yet but when we finally get it I'll... Who am I kidding? I've no interest in streaming music.

Staff
Steve Steve said:

We don't have spotify in my country yet but when we finally get it I'll... Who am I kidding? I've no interest in streaming music.

So you have no interest in music then? Strange comment but moving on ... I jumped on board the day it came to Australia and to this day I am a premium user, love it!

JC713 JC713 said:

So you have no interest in music then? Strange comment but moving on ... I jumped on board the day it came to Australia and to this day I am a premium user, love it!

I will probably get Premium if this "free" streaming idea doesnt get through. I would be glad to pay Spotify for trying and caring about us.

tonylukac said:

The problem they didn't seem to think of is the very restrictive caps with mobile. Many prepaid plans only allow like 500M. I suppose people can use wifi, but each play of a song can be 10M on the phone network. I don't think it will fly too far. People are just too cheap to afford 99 cents a song, I guess. When you used to buy a record, it didn't play on every device possible. This is sure a far cry at how my brother bought his songs. He bought the vinyl album, the 8 track, the cassette, the cd, and the mp3s, perhaps for the same artist. The changes are really extreme.

Staff
Steve Steve said:

The songs are very small to download (using normal quality anyway), I only have a 2GB data plan but I stream music daily and have never come near even half my monthly cap. The way I do it and I suspect most others is to download all the music I want to my mobile device using the home broadband and then set Spofity to offline when I am on the move.

"People are just too cheap to afford 99 cents a song, I guess"

What do you mean by that?

Skidmarksdeluxe Skidmarksdeluxe said:

So you have no interest in music then? Strange comment but moving on ... I jumped on board the day it came to Australia and to this day I am a premium user, love it!

Who says I don't like music? Contrary to popular belief, jumping to conclusions is not good exercise. I just prefer to buy a physical CD (or LP, seven single. etc.) like I've always done.

JC713 JC713 said:

The songs are very small to download (using normal quality anyway), I only have a 2GB data plan but I stream music daily and have never come near even half my monthly cap. The way I do it and I suspect most others is to download all the music I want to my mobile device using the home broadband and then set Spofity to offline when I am on the move.

"People are just too cheap to afford 99 cents a song, I guess"

What do you mean by that?

Pirating has really killed iTunes.

Staff
Steve Steve said:

Pirating has really killed iTunes.

Really, I thought opposite was true. Pirating music was around long before iTunes.

Who says I don't like music? Contrary to popular belief, jumping to conclusions is not good exercise. I just prefer to buy a physical CD (or LP, seven single. etc.) like I've always done.

Wasn't a conclusion it was a question based on the only information I had which suggested you didn't. Anyway each to their own you are free to buy CD's but expect to be in the minority as services like Spotify make far more sense.

JC713 JC713 said:

Interesting, I guess the fear of pirating deters people to iTunes

Staff
Steve Steve said:

Not so much fear as it is convenience.

iTunes made it possible to buy any song you wanted for $1 which made pirating for some a complete waste of time (personally I didn't like iTunes and refused to use it). Before iTunes you had to buy an album or single and there might have only been one or two songs you really liked. Of course there were mixed CD's but ultimately listeners faced the same problem.

So to recap iTunes was popular because you could buy exactly what you wanted. I see companies like Spotify as the next evolution and today there is just no point at all in downloading MP3's, you really are wasting your time.

Skidmarksdeluxe Skidmarksdeluxe said:

Really, I thought opposite was true. Pirating music was around long before iTunes.

Wasn't a conclusion it was a question based on the only information I had which suggested you didn't. Anyway each to their own you are free to buy CD's but expect to be in the minority as services like Spotify make far more sense.

I'm not so sure about making more sense but it's more convenient. It will also be more expensive in the long run because of it's convenience. So convenient in fact that you'll (read me) probably end up buying stuff you had no intention of buying. I'll just stick to what I know best. Cheaping out without reverting to piracy. That being said I will give it a try when we finally get it.

JC713 JC713 said:

1.29 per song isnt that cheap for some people... I liked when songs were $.99 back in the day

Skidmarksdeluxe Skidmarksdeluxe said:

$1.29 for a song??? Jeepers! I remember when full albums used to cost that and it wasn't that long ago.

JC713 JC713 said:

$1.29 for a song??? Jeepers! I remember when full albums used to cost that and it wasn't that long ago.

Some people dont have that type of money to spend on songs dude.

BlueDrake said:

I just really wonder though if people notice, artists don't make all that much per play. It's just small fractions of a penny, also where's the really appealing music? All that it is anymore, is the same old meh stuff rehashed. Movies, games, etc all have better music then I find topping the charts.

I've gone back to game music, be it remixed or such as an outlet for enjoyment. I'd rather pay for an album on Bandcamp or such, then waste money on Apple's horrible monopoly. Spotify and others don't give enough, that I'd rather donate directly to the artists. Guess I'm part of the "minority" as you say, but really there's so much better than many generally hear.

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