Spotify Now The #2 Revenue Source For Major Labels After iTunes
According to a source close to the streaming giant, royalty payouts from Spotify now account for the number two source of revenue for the major labels. While Apple’s iTunes remains firmly in the number one slot by a wide margin, Spotify hopefuls (namely early investor Sean Parker) believe that the streaming giant will one day surpass iTunes: "If we continue growing at our current rate in terms of subscriptions and downloads, we’ll overtake iTunes in terms of contributions to the recorded music business in under two years," Parker said at this year’s SXSW.
As Business Insider learned yesterday, major labels have been seeing a significant source of their revenue come from Spotify, but still not nearly as much as they do from iTunes. Between the two, both iTunes and Spotify pay out roughly the same percentage of revenue to rights holders (iTunes pays out 70% of revenue to rights holders, while Spotify pays out roughly the same percentage of revenue in content costs). Parker’s assertion, while certainly bold, isn’t entirely unrealistic. Over 23 million people used Spotify last month alone and the service has already been a leading source of revenue for labels in several European countries.
But Parker may be (at least for now) comparing apples to oranges, as iTunes is primarily used as a digital music retailer, while Spotify is in the subscriptions and advertisement business, with the only common measurable ground between the two being revenue. However, in countries where there isn’t much of a download market (like Sweden or France for instance), Spotify could see a greater share of the pie than iTunes, and could potentially surpass Apple in terms of prominence.
In the United States however, where the download market is strong and growing, Spotify will unlikely surpass iTunes; especially as Apple holds the power to one day create a Spotify-like service of their own at any moment.
Should they so choose, Apple can easily convince millions of users to sign up to a new service, as it has already forged the landscape in a way that positions this new service on top no matter what rival services have accomplished. Apple will always be more integrated and cheaper than anyone else on the market will, and this is a reality everyone is waking up to. Apple owns the App Store (not to mention the iPod, iPhone, and iPad), and not once did it forget that.