Negotiations between music streaming service Spotify and all three major record labels have hit a snag lately and Apple Music is a big reason why.
Spotify’s licensing agreements with Sony, Universal Music Group and Warner Music Group have reportedly been on a rolling month-by-month basis for much of 2016, yet the companies haven’t been able to hammer out long-term deals yet because Spotify isn’t willing to share as much revenue as Apple Music.
“It’s common knowledge that Apple Music is paying 58% of revenue to labels – after users’ free trial periods have finished. The majors want Spotify to move its revenue share up towards that point,” reports Music Business Worldwide.
The record labels are allegedly unimpressed with some of Spotify’s recent spending decisions. Meanwhile, Spotify is trying to push down its revenue share percentage so it can become profitable before filing for an IPO.
Spotify currently pays a revenue share of around 55 percent to record labels and might be asking them to accept a rate below 50 percent. To combat Apple Music, Spotify is also reportedly exploring the possibility of locking down artist exclusives now that Apple and Tidal have made waves with their own exclusives.
The negotiation between Spotify and major labels “remains optimistic,” according to Music Business Worldwide sources, with the most likely outcome being a licensing deal with revenue sharing around the same level it’s been for the last three years.
Buster Hein is a freelance writer who lives in Phoenix, Arizona. Twitter: @bst3r.
6 responses to “Apple Music is ruining Spotify’s negotiations with record labels”
Why would the music industry want to cut its own throat by reducing its revenue cut? Why would music artists want to reduce their own pay? The answer is: NOT.
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As far as I know, Spotify’s business model is unsustainable and they lose money every quarter. It’s clear that ads are not bringing in the revenue required for Spotify to continue – It’s time to get rid of the free tier or die as a company.
Record labels are starting to see the free tier as a good thing because it’s one of the only features spotify has that apple music doesn’t.
How exactly is this a “good thing” for record labels?
Peter, those criminal running big record labels are not hurting and the big name no-talented artists are not hurting either. Their greedy selves are actually doing just fine. The only people who are hurting and will hurt more are the every day people, but It just seems that CAPITALISTIC SUPPORTERS have a hard time understanding that.