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Spotify now number two revenue source for music industry

updated 06:50 pm EDT, Tue June 26, 2012

Spotify could overtake iTunes within two years

On-demand music service Spotify is now the number two revenue source for the major music labels. Sources close to the company have told Business Insider that the music streaming service has leapfrogged the competition, and only Apple stands ahead of it now. Further, should the company continue growing, it is possible that Spotify could supplant Apple's iTunes in the near future.

The source didn't reveal exact figures on Spotify's revenues, but the gap between the Spotify and Apple is said to still be sizable. Apple paid around $3.2 billion to the record labels in 2011, according to some estimates, continuing its run as the biggest name in music distribution. Spotify, though, has 23 million regular users of its service, which comes in free and ad-supported models. Speaking at SXSW earlier this year, Napster cofounder Sean Parker -- an early investor in Spotify -- said it wasn't outside the realm of possibility for the company to overtake iTunes were it to continue growing at its current rate.

Spotify's growing importance in the music industry could give the music companies some leverage in their complicated relationship with Apple. Apple's iTunes Store is far and away the largest distributor of music today; but were Spotify to make strides in the sector, the labels could possibly use those successes to gain concessions from Apple, including a long sought-after iTunes subscription service.

Spotify, for its part, is looking to parlay its increasing popularity into greater revenues. The company could record $889 million in revenue this year, according to chief executive Daniel Ek.

Despite rumors of disappointing adoption rates for its paid service, the company has expanded its offerings, releasing a long-awaited iPad app in May and adding radio features to its existing service. Earlier today, the company also announced a partnership with Yahoo that will see Spotify integrated across Yahoo's Media Network, which reaches nearly half of the total worldwide Internet audience.



By Electronista Staff
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