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February 20, 2013

Spotify Renegotiates Music Royalties, Mobile Service with Labels

By David Delony, Contributing Writer

The popular music service Spotify (News - Alert) may give users access to almost all of the recorded music ever produced, but all of those tunes costs money. Spotify is attempting to negotiate with major labels to reduce the cost of licensing their music.

The company, based in Stockholm, is already in talks with Warner Music and plans to negotiate with both Sony and Universal.

The company boasts over 20 million subscribers, with five million of them actually paying for the service.

As popular as Spotify is, the costs of licensing the music are astronomical. Spotify pays about 70 percent of its profits on royalties to the labels, with another 20 percent going to content acquisition, or buying the music in the first place.

Spotify raised $100 million in a funding round last year.

 Artist royalties are a possible sticking point. Major acts like Adele and Coldplay have balked at the platform, before finally releasing their latest albums on the service.

Although it’s not clear if royalties have anything to do with it, but rock fans will also notice some glaring holes in Spotify’s collection. Fans looking to stream The Beatles, Led Zeppelin or Pink Floyd will have to look elsewhere.

Spotify also wants to expand the use of its mobile apps. Currently, Spotify subscribers can only access the iOS and Android (News - Alert) apps when they sign up for one of the paid tiers of the service. Spotify also offers a free 30-day trial to entice users to sign up. The company wants to make a free mobile version permanent, with advertising, similar to the desktop version of Spotify.

The personalized streaming radio service Pandora (News - Alert) has also expressed a desire to renegotiate its licensing deals with labels, to the point of petitioning Congress.

If Spotify fails, it could doom the entire music industry.

“Everybody in the industry wants to see Spotify succeed," an anonymous industry insider told The Verge. "Nobody in the industry can afford to see them go down the tubes."

Spotify isn’t the only music streaming game in town. Slacker has revamped its online radio offering.

Edited by Braden Becker
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