updated 07:55 pm EST, Thu January 21, 2010
Streaming service shares subscription fees
Spotify has reportedly developed a revenue model that Universal Music Group International considers to be "sustainable," the music label's senior VP Rob Wells told Telegraph. Spotify currently pays royalties per stream in the UK and Spain. In Sweden, Norway, Finland and France, the company shares revenues from money generated by subscriptions and advertising instead of the per-stream system.
The different methods for various territories are necessary due to the limited number of subscribing customers in the UK and Spain. Wells claims Spotify must convert 10 to 12 percent of its user base, in any territory, to generate enough cash to avoid the per-stream royalties. The company has had difficulty in the UK and Spain, as customers have grown accustomed to using the free service.
In all its territories bar two, Spotify pays the labels from a mixture of the money it generates from advertising revenues and subscriptions," Wells said. "That to me equates to a sustainable business model."
Spotify is expected to reach the US sometime in the near future, although it is unclear if the terms will be adapted for the North American market. European subscribers currently pay £10 per month for the ad-free version, while the free version is available only by invite in certain regions.