Wednesday 20 February 2013, 11:39 | By

Spotify renegotiating terms with majors

Business News Deals Digital Labels & Publishers

Spotify

Spotify is about to begin talks with the three music majors about renewing its licensing agreements, according to The Verge, and bosses at the streaming music service are expected to ask for more favourable rates as they endeavour to make their business commercially viable long term.

According to the tech site, talks with Warner are already underway, while meetings with Sony and Universal are scheduled. It’s thought that the option of extending Spotify’s freemium option to mobile devices will also be discussed.

If cutting royalty rates is on the agenda, some tough negotiations could be imminent, given that many in the industry already reckon the royalties paid out by the streaming services are low.

Although, for the majors, total streaming revenues across entire catalogues are more substantial, and as shareholders in the Spotify business they have an interest in seeing it succeed, at least until any future IPO or Netflix takeover.

While streaming and subscription music services have seen the most growth in the digital music domain in recent years, and are arguably more attractive to younger consumers than iTunes-style download stores, most players in this space are still relying on venture capital or tech-partner advances to make things add up.

Optimism generally remains at the top of the streaming firms, though some doom-mongerers have already questioned whether current streaming business models can really work long term.

And whether the ten pound a month subscription rate (with cheaper more limited options) wasn’t too low a price with which to enter the marketplace (as with the 99 cents per download price point, it was sort of picked for marketing rather than economic reasons).

Still, one source told The Verge: “Everybody in the [music] industry wants to see Spotify succeed. Nobody in the industry can afford to see them go down the tubes”. But expect much speculation and gossip as the Spotify/label meetings progress.

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