How's does Spotify make money?

Many (including us) have been confused how Spotify's business model actually works. We asked Ek whether it pays for music on a flat-rate system or per-song. As we expected, he was cagey. "In basic terms, Spotify aggregates content from right holders, distributes it to consumers through our technical platform and monetises both through a free, ad-funded service, and a subscription service," explains Ek.

"As a rule we can't discuss the specific deals agreed with the various record companies, although it's fair to say they're based in part on track streaming volumes."

But what about the artists missing from Spotify? Why aren't they there? "We already have music from all the major labels and a vast majority of the independent labels licensed. Now it's a matter of importing that music into our system, which we are doing on an ongoing basis in an effort to add thousands of albums a week," says Ek.

"We continue to work hard to sign deals with more labels and will work with the labels we have signed to fill the ever-dwindling gaps in our catalogue."

Spotify was recently in the news for the wrong reasons after there was a problem with some music deals that meant tracks had to be removed from the Spotify catalogue.

Ek revealed that "unfortunately some artists have opted not to be added to Spotify at this time, such as Metallica, The Beatles, Pink Floyd, ACDC and Led Zeppelin, but we're aiming to have all the world's music available at some point in the near future and we're constantly updating our catalogue."

"Our dream is to create a music experience where users can play whatever music they want, whenever they want. It will take a little time but we are in this for the long haul to create the biggest and best music experience on the planet."

Will paid-for accounts succeed?

We also asked Ek if it has been complicated to negotiate multinational deals with the labels and whether the music available is different in each territory. "Releases are specified on a territory-by-territory basis and there might be differences between an album in one market and the same album in another market," explains Ek.

"The content is available anywhere through P2Ps and other means. To address this, the legal services need to have the support of all rights holders and the strength of marketing and distribution that they currently have.

"That's how we create a winning concept in the music industry today. It has helped us enormously to have aggregators like The Orchard on the independent side to facilitate the delivery and contractual parts needed."

Most Spotify users are currently free, but Ek points out that as the volume of users continues to increase Spotify's value to advertisers will increase exponentially.

Ek adds that he'd like to think that paid for accounts will increase in terms of popularity, even if rivals like Napster haven't exactly set the world alight. "We believe we offer our paid users a music service that outstrips anything that's previously been available, both in terms of the quantity of music and quality of service on offer.

"We have some seriously big plans for our paid subscriber service which we believe will give them huge value for money, both in terms of additional content and exclusive services. Watch this space!"

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Now read: Spotify - the biggest thing in music since Napster 1.0?

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