Spotify, the Swedish streaming company is no longer in contract with three major companies, Universal Music Group, Warner Music Group and Sony Music Entertainment. However, this is not a critical problem for Spotify because it is still licensed by the three major music companies on a month-to-month basis. The possibility for the UMG, Warner and Sony catalogues to be pulled out is definitely out of the question.
Actually, the major music companies are irritated with the latest promotional deals of Spotify including its latest family plan that closely matches with Apple Music’s equivalent wherein six people premium access is provided for only $14.99 a month. Some of the parties in the three major companies are rather uneasy about Spotify’s decision to promote without the existence of long term licensing agreements. A major source at MBW considers the situation as grey area.
A bigger story however is the reason behind the entire licensing impasse. Spotify’s earlier licensing deals with the major companies in the likes of Universal’s Rob Wells were softer in terms of revenue shares than the contract agreements with rivals like Rdio. This can be justified by the marketing discount provided to Spotify with Daniel Ek committing a portion of the savings to spend on swiftly growing the company’s footprints. MBW understands that Spotify continues to pay 55% revenue share to labels.
On the other hand, the major labels are not too happy over Spotify’s most recent spending decisions and they want Spotify to move its revenue share up to 58% – the amount that Apple Music is paying to labels after the user’s free trial period has expired. However, Spotify is attempting to push the revenue share down meaning it wants to pay labels and artists a small portion of the proceeds. Spotify wants the majors to cut it some slack so that it can compete with Apple’s spending power.
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