Spotify looking to extend ad-supported, free tier to mobile

A report by The Verge outlines Spotify's plans to introduce their free, but ad-supported, music tier onto mobile devices. The report states that Spotify executives will meet with executives at the music label big three - Sony, Warner and Universal - to agree a drop in royalties to artists, as well as to get permission to introduce the free tier onto mobile. 

Spotify recently raised $100 million in funding, so cannot claim to be cash poor which won't help their bid to drop royalty payments to artists. Rumours have been circling recently that Apple will introduce a rival to Spotify and Rdio, which will include unlimited music streaming, but will be an iOS-only affair. Spotify already has over 5 million paying customers, with a total user base of over 20 million. Rdio, for contrast, has over 10 million users, of which all pay. While Spotify charges up to £10/month for its premium service, it is unknown whether it is profitable. Sources told The Verge that 70% of the companies revenues go into music royalties, 20% into customer acquisition, which leaves 10% for all other payments, such as staff salaries and Spotify's much-praised technology platforms. 

Some artists - including Adele, Coldplay and Taylor Swift - refused to allow their music onto Spotify, at least initially, because of the low royalties, especially when compared to iTunes or Amazon's MP3 service. If artists choose to pull out of Spotify, it will cause irreparable damage to their service, which will ultimately lead to Spotify, it's users, and the artists losing out. It's a tricky line for the industry, support the new wave or crush it before it gains traction. 

Spotify is arguing that introducing an ad-supported, free client on mobile will expand the audience that listens to an artists music, as well as expanding Spotify's potential revenue. Labels want their music to be listened to by as many as possible, but disagree with Spotify's low rates, as they did when Jobs first proposed iTunes to them back in the early 00s. Spotify has generated real scale with its service, something the labels are said to look favourably on. Whether they will agree to Spotify's latest proposals, still remains to be seen. 

Source: The Verge, Image via: Fast Company

Report a problem with article
Previous Story

Microsoft employees gave $105 million to charity in 2012

Next Story

Microsoft reportedly teams up with Oracle in Google legal fight

9 Comments

Commenting is disabled on this article.

pay 12NZD a month to have this on my iPhone and love it. Deleted all my music and moved to this full time. There are some artists not on there but over all im happy with the service.

I'm curious as to why they don't have an option to pay for a particular song or album. I mean, it seems so obvious: either subscribe and enjoy unlimited music, or purchase the songs you want so you can at least put a CD together...

Would that complicate their model, or am I the only one that would actually like to do this?

How much would a song or album cost? Here in the UK, unlimited streaming costs £10/month. An album costs about £5, so you could either buy two albums per month or have those two and the whole of Spotify's song database...

maxslaterrobins said,
How much would a song or album cost? Here in the UK, unlimited streaming costs £10/month. An album costs about £5, so you could either buy two albums per month or have those two and the whole of Spotify's song database...

I get that aspect of it, but for family that don't have a means for streaming Spotify, utilizing CDs or flash drives in their car or something, it'd be pretty nice. It's also worth noting that Spotify has quite a bit of obscure content I've struggled to find elsewhere. I love the service, just questioning if it's a feasible idea at least.

Spotify - no matter how hard they try - can't please everyone. I think, and this is my personal opinion, that their current service/pricing is perfect. This news just makes it better.

- Sony, Warner and Universal - to agree a drop in royalties to artists

Yeah that's not going to happen.

The media companies don't like streaming/rental services because it cuts into their bottom line.

But it's not going to cut into their bottom line. Emphasis mine:

- Sony, Warner and Universal - to agree a drop in royalties to artists

Unless I'm reading it wrong, this is ****ed up. The artists are already getting screwed on royalties (literally pennies on the dollar/pound), and these guys are negotiating on their behalf to cut the artists' pay, while lining their own pockets.

I'm a Spotify user, but this kinda makes me not want to be.