Universal Music Group Puts the Squeeze on Spotify's "Freemium" Model
Sources close to Universal Music Group have reported that the record label is putting pressure on music streaming service Spotify to adopt a more subscription-driven business model. The rumors of license negotiations between the two companies have emerged in the wake of a controversy between the latter company and Taylor Swift, in which the pop star pulled her discography from the service.
Spotify has built its success in the music streaming sector by providing its users a free service while offering incentives for paid subscriptions which ultimately earn the company most of its revenue. Last month, Universal Music Group CEO Lucian Grainge speculated, "Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors," placing pressure on Spotify to limit or discontinue its "freemium" services.
Jonathan Forster, who oversees the Nordics region of Spotify, argues, "Without free, pay has never succeeded. We're one of the greenest shoots of growth in the industry. We don't want to destabilize that. We think that this model works."
The debate is by no means the only recent instance of a big four record label attempting to reclaim control over the industry. As revenue from streaming services recently eclipsed that of CD sales, the recording industry's slow decline has prompted companies like Dubset Media Holdings to offer services tailored to publishers attempting to collect on the money they're losing to the trend.
Photo Credit: New York Post
[H/T: Dancing Astronaut]