Wednesday, February 20, 2013, 11:05 am PT (02:05 pm ET)
Spotify wants to bring free ad-supported music streaming to its iPhone appMusic streaming and subscription service Spotify is said to be preparing to renegotiate its licensing agreements with the recording industry in an effort to possibly extend its free pricing option to mobile devices.
Spotify is already in negotiations with Warner Music, with Sony and Universal talks set to begin in the next few weeks, according to The Verge. How the company fares in discussions with those "Big Three" record labels will likely impact negotiations with smaller players.
Spotify is said to be seeking reductions in the fee it pays to the labels. Licensing expenditures take up about 70 percent of the company's revenues, with another 20 percent covering customer acquisition. The remaining 10 percent pays for Spotify's other costs, meaning the company essentially just breaks even.
While Spotify is said to be second only to Apple's iTunes in terms of the amount it pays out to music publishers, the service has been the target of many complaints from artists. A number of musicians have held back their works from Spotify, claiming that the company doesn't dispense nearly enough royalties to artists.
In addition to lower licensing fees, Spotify is also said to be working to bring its ad-supported free listening model to mobile devices. Currently, the free model is only available on traditional computing platforms, with users able to listen on their mobile devices only if they purchase a paid subscription.
Spotify faces an increasingly crowded music streaming market even as it attempts to achieve profitability. In addition to competition such as Rdio and Moog, Google, Amazon, and Microsoft are all getting into or thought to be getting into the music streaming segment. Perhaps most worryingly for the company, Apple has for some time been said to be in talks for its own streaming service, and recent revelations seem to indicate that such a service may be appearing in the very near future.
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