Spotify has signed a licensing deal with record label EMI today, giving the European music service two out the four major music labels. Last month Spotify signed a licensing deal with Sony Music, leaving Warner Music Group and Universal Music as the last two major record labels.
The popular music streaming service is big in Europe but it’s been having trouble breaking into the subscription-based music market. There are plenty of subscription-based music services out there already like Rhapsody and Sony’s own Music Unlimited which launched today. The problem is that U.S. labels charge higher royalties to subscription services than free ad-supported services.
If the provider changes any subscription fees, the higher rate is applied to all streams, not just the paid subscription ones. That’s why you don’t see any free premium music subscriptions, only free trials. Spotify has only around 750,000 subscription customers paying for music, and over 10 million customers using the free version. With higher royalty fees plus Apple’s new subscription services fees, Spotify will have to adjust quite a bit. We’ll see if Spotify can sign deals with the remaining major labels and if a U.S. launch means changing its pricing model to be more like U.S. subscription music services.
[Via Business Insider]