Major labels pressuring Spotify to abandon free music model

Major record labels in the U.S. are reportedly pressuring digital streaming music service Spotify to jettison its current free content approach in favor of a guaranteed revenue model, with insiders citing the impasse as the culprit behind Spotify's inability to expand into the North American market. BusinessWeek reports the four majors--Universal Music Group, Warner Music Group, Sony Music Entertainment and EMI Music--have licensed their catalogs to Spotify for use in markets like the U.K., Spain, France, Finland, Sweden, Norway and the Netherlands, where most consumers tune in to a free, ad-supported version of the service. But in the U.S., the labels want Spotify to follow the lead of rivals like Rhapsody and eMusic by introducing premium monthly subscriptions, enabling the music industry to share in resulting revenues. "Free streaming music services are clearly not a net positive for the industry," said Warner Music CEO Edgar Bronfman Jr. during a February earnings call. Warner was an early Spotify investor.

Spotify now boasts 7.7 million registered users across Europe. In addition to its signature free service, the firm offers two premium plans--for about $6 per month, listeners get unlimited playtime with no ads, while a $12 package features improved sound quality and access from smartphones including iPhone, Android and Symbian devices. BusinessWeek states that only about 320,000 users have signed up for the premium options. The report also notes rumors that Google is "kicking [Spotify's] tires," adding that no acquisition is in the works. Last month, Google announced plans to add a streaming music service to its Android platform.

For more on Spotify:
- read this BusinessWeek article

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