The deal will be similar to the ones Spotify already has in Europe, where the service is already popular. Spotify lets users stream music for free with advertisements, or pay a monthly fee to access the ad-free or mobile versions. Spotify will reportedly cost $10 per month if it ever launches stateside. Up until now, US labels have hesitated to support Spotify's model as they don't believe it can be profitable.
Spotify saw a huge financial loss in 2009. The music-streaming company enjoyed revenues of £11.32 million, but endured distribution costs of £608,711, cost of sales equal to £18.82 million, and administrative expenses of £8.29 million. The result was an operating loss of £16.40 million, and a net loss of £16.66 million after taxation.
With Sony reportedly signed up, it may be easier for the other major labels to follow suit. Still, it will be tough for Spotify to compete in the US even if it manages to sign with the big four labels. In the US, there is competition from subscriptions offered by Microsoft, Rhapsody, Napster, Rdio, MOG, and Thumbplay. Spotify has had it much easier in Europe, where such a variety of subscription services simply doesn't exist. Furthermore, most music listeners in the US buy their music from Apple's iTunes or simply don't pay for music at all.