Streaming music services like Pandora, Rhapsody and Spotify are largely credited with helping steer the music industry away from the piracy path. The current model is sustainable (and legal) but for the largest music group of them all, it’s still not generating enough revenue.
Last month, Universal Music Group CEO Lucian Grainge voiced his concerns regarding the freemium business model that’s popular among the top streaming providers. The executive said ad-funded on-demand is not going to sustain the entire ecosystem including creators and investors.
Now it looks like they’re going to try and do something about it.
A recent report from the Financial Times claims Universal Music Group is using ongoing contract negotiations to try and strong arm Spotify into enforcing additional restrictions on its free listening service. The idea is that limiting access would convince more free users to sign up for the $9.99 per month premium service which would in turn put more money in the hands of labels.
According to the Rolling Stone, Universal isn’t the only company pushing to further restrict free offerings as “most” labels have joined the movement. What’s more, executives with Sony Music and Warner Music have both expressed doubts regarding the freemium model.
One option that labels would be happy with is limiting the amount of music a user can listen to (perhaps X number of hours per month). Another possibility would be doing away with free on-demand music, instead forcing the field to adhere to the Pandora-style Internet radio model.
It’s an interesting change of heart as at one time, most record labels championed the idea of free ad-supported streaming. Of course, that was at a time when many were pirating MP3s.