updated 11:45 pm EST, Fri February 4, 2011
Leaks show labels unhappy with Spotify revenues
Spotify's revenues for music labels are just a fraction of what the studios see at other stores, a contentious rumor maintained on Friday. After reportedly talking to both the labels and bands, Metronome saw a mixed opinion on the streaming service. The most critical label executive called Spotify's revenues "microscopic" compared to iTunes, Amazon MP3 or even eMusic, and thought it was borderline "scandal" that it was even allowed.
"Their game plan is to devalue music 10 - 20 fold [sic] and then swallow it up like Pacman," the executive said.
Another likened it to the stereotypical technology bubble company, which raised as much money as possible before the "business falls apart" and could start again solely based on the ability to attract venture capital funding.
More positive comments came from one label executive, who said Spotify took great pains to make the licensing arrangement "as transparent as possible." Artists were much more in favor as they suggested a 50 percent cut of ad money was reasonable and that the exposure was worthwhile. One warned that he "not see much of a return" on it but was willing to make the sacrifice.
Spotify has never publicly disclosed how much revenue it generates for labels and artists in a way that could be compared to rivals. The claims should so far be treated as rumor.
Corroborating evidence regardless hint at a level of accuracy. Universal Music called Spotify sustainable, but Spotify has been unsuccessfully trying to land US deals for the past two years and missed a 2010 target it once considered certain. Labels have publicized their views that Spotify would devalue their music, but multiple rumors have alleged that the main concerns are the lack of emphasis on the paid, Premium service. With the full catalog available for free with ads and relatively little marketing of the paid version, almost all of Spotify's subscribers don't pay the minimum fee.
The service among the top music services in Europe but is generally known to make less revenue than a store like iTunes. Apple and its pay-per-track peers have potentially limited audiences but will often make as much revenue on one or two albums per month as they would for unlimited audio streams over the same period.
Industry tips have suggested that Spotify is getting closer to an American deal, but it may have had to make more than one major sacrifice to get any deals, including blocking off some content from free users and paying large sums up front.