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Spotify seeks cut in royalty fees to allow for free mobile service

Posted: , by Alan F.

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Spotify seeks cut in royalty fees to allow for free mobile service
Screenshots from Spotify's iOS app
Screenshots from Spotify's iOS app

Screenshots from Spotify's iOS app

Streaming music app Spotify might soon offer a free tier of service to its users who access the service via a mobile app. Those familiar with the situation say that the company has started meeting with the major recording labels. The goal is to reduce the royalty rates that Spotify pays them, and at the same time, get the rights to offer a free tier of music for mobile devices similar to what Spotify offers on the desktop.

Spotify, based in the U.K., is said to have already started negotiations with Warner Music and has plans to meet with Sony and Universal in the weeks ahead. The highly competitive field could have another big player soon if speculation that Apple will launch its own streaming music service later this quarter is true. Spotify has 20 million users globally, but only 5 million are paid subscribers. Currently, 70% of Spotify's revenues go toward paying royalties while 20% pays for customer acquisition costs. The remaining 10% covers other costs including Spotify's technology, which has been praised by listeners. This business model leaves no room for profits which is why the new negotiations are so important, especially if a free tier of service for mobile users is being planned.

Will Spotify be successful in cutting licensing fees? The company already pays among the lowest royalties to artists, so there might not be that much more room to maneuver.

source: TheVerge via Gizmodo

6 Comments
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posted on 20 Feb 2013, 11:15 4

1. boosook (Posts: 1075; Member since: 19 Nov 2012)


I'm a paid subscriber... the service is so damn good... the phone app is very good, the client is well made and available even on linux... I hope they will succeed.

posted on 20 Feb 2013, 11:29 1

2. Synack (Posts: 668; Member since: 05 Jul 2011)


If it were free on Mobile I would use it, otherwise I'll continue to not use it.

posted on 20 Feb 2013, 12:49 2

3. johnfranckiv (Posts: 17; Member since: 05 Oct 2011)


Spotify is the only subscription I pay for on my phone... and it is worth every penny to me!

posted on 20 Feb 2013, 15:48 2

4. KingKurogiii (Posts: 5633; Member since: 23 Oct 2011)


yeah, Spotify is definitely worth the subscription fee. everyone should have this if it should ever become free.

posted on 20 Feb 2013, 19:02

5. cheeseycheeser (Posts: 389; Member since: 24 Mar 2011)


I really really love Spotify! Completley worth $10. I'm really suprised how little they make.

posted on 20 Feb 2013, 22:11

6. gmracer1 (Posts: 646; Member since: 28 Dec 2012)


I want just the OnDemand to be free.

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