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Business News Digital Labels & Publishers
Spotify predicts one billion pay out to Universal alone over next two years
By Chris Cooke | Published on Thursday 12 March 2015
Spotify has predicted that it will pay Universal Music a neat $1 billion in royalties over the next two years, which I think is tech speak code for “stop your moaning you whiny fuckers and sign the bloody licensing deal”. The streaming service made the calculation in an email exchange with the mega-major, according to the New York Post.
It’s widely believed, of course, that negotiations for the latest renewal of Spotify’s licence from Universal Music are heavy going, because the major is having second thoughts about freemium.
While everyone just loves Spotify’s fifteen million paying users, many reckon that the 45 million freemium streamers that the service is also propping up are a problem, because ad revenues are modest. And many in the record industry now believe that a big chunk of those freemium Spotify users are ex-iTunes customers, which is why download sales are in decline.
Spotify begs to differ of course, but aside from any hit iTunes is or is not taking from Spotify Free, such a good freemium offer from the market leader is making it difficult for people seeking to nurture a mid-market streaming service, offering less catalogue or functionality for a lower monthly subscription.
But it seems highly unlikely that Universal could pull from Spotify, a service in which it has equity. Whether it can force refinements on freemium remains to be seen, though the message from Spotify in the email shared with the Post is clear: freemium is building premium, and you need those premium users as much as we do.
According to the Post, Spotify reckons that its royalties will account for 16% of the major’s revenues by March 2017, up from an expected 11% in the year ahead.
