The truth behind Spotify's financial status has been revealed by a key music exec, who believes that the free version service may be too popular in the UK for it to make money from subscriptions.
Speaking at an event in conjunction with the publication of the IFPI's (International Federation of the Phonographic Industry) digital music report, Rob Wells, Senior Vice-President Digital for Universal Music Group International, praised the service for its "sustainable financial model" but did highlight issues it was having in the UK, noting it was here and in Spain where it was "lagging behind" when it comes to the way it pays record companies.
"In all its territories bar two [the UK and Spain], Spotify pays the labels from a mixture of the money it generates from advertising revenues and subscriptions. That to me equates to a sustainable business model," Wells explained.
Down the stream
The problem with the UK and Spain is that the lack of subscribers means that music companies are being paid per song listened to instead of from an advert and subscription money pot. This means a decidedly smaller revenue stream.
Wells also revealed that it doesn't take a massive percentage of people to subscribe to make enough money to pay for the music – around 10 or 12 per cent per territory, but it is unclear how far behind the UK is from reaching that figure.
The IFPI report today does show that Spotify has its work cut out in maintaining a user base, as there are now 400 services licensed worldwide by music companies with ISPs, mobile and other partners.
It makes sense that the record industry becomes part of the myriad music streaming sites out there – but more services on offer does mean that the likes of Spotify and Sky Songs will have to try that little bit harder to entice music listeners to their service.
Via the Telegraph
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tech89
January 22nd 2010
3. @healeydave
Spotify is FREE and has been always. It was originally invite only (free), then opened up for all (free), then they switched it to invite only again (free still) you just need to submit your email and they send you an invite.
Spotify is a great way to explore and find new artists and find similar types of music to the types you already own.
You ONLY pay for spotify FOR PC if you don;t want the 2 adverts that play after every 9 songs or so.
Mobile use of spotify costs because it works differently to the PC, it doesn't use p2p technology on the phone as it does on the pc so instead each song you request is sent out on a separate stream which adds to spotify's running costs. Hence, mobile use is a privilege, that has to be paid for.
Why use spotify you ask, well not everyone has a huge media library that has been built up either by piracy downloads or by many many cd's bought. It is a great way to enjoy many tracks for free on your pc.
Why the invitation only now? Well, spotify needs some more people to subscribe to it's paid service, and the invitation only is supposed to put people off, but only if your impatient and can't wait for an invite.
If you use it, you may actually 'get it'.
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avi
January 22nd 2010
2. I like the idea of Spotify, but would never pay and I don't trust record companies because they are always threatening someone or inveigling pliable government ministers into doing their dirty work. They seem a horrid bunch.
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healeydave
January 22nd 2010
1. Spotify is not FREE.
The free service is by invite only.
I don't use it, and I don't really get it if I'm honest. I have looked at it several times because its been in the news a lot but I always see its something that's going to cost me money and end up being one of those webpage statistics where the user visited the index page for 2 seconds :-)
If I ever want to listen to music, I have whatever I want to listen to at hand, via my own media library, be it on a computer or a mobile device, why do I want to pay to stream tracks!???!?
I must be missing something.
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