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

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



1. boosook

Posts: 1442; Member since: Nov 19, 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.

2. Synack

Posts: 688; Member since: Jul 05, 2011

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

3. johnfranckiv

Posts: 17; Member since: Oct 05, 2011

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

4. KingKurogiii

Posts: 5713; Member since: Oct 23, 2011

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

5. cheeseycheeser

Posts: 413; Member since: Mar 24, 2011

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

6. gmracer1

Posts: 646; Member since: Dec 28, 2012

I want just the OnDemand to be free.

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