Although it's hoping to go public this year, Spotify's licensing deals with major labels are, for the moment, out of contract. As Spotify reworks these deals, it's expected that the different payment tiers available through Spotify will soon look different.
Guest post by Bobby Owsinski on Music 3.0
As mentioned here before, Spotify’s licensing deals with the major labels is currently out of contract. This is a big deal since the company wants to go public this year, and that could be put in jeopardy if it doesn’t have its licensing house in order. But the labels are driving a hard bargain, not only financially but how their new music will be served up to users, and that could make Spotify tiers look different soon.
One of the things that’s already happening is that some of the hottest new releases will only be available on the paid tier (why did it take them so long to think of this?). Of course that’s an incentive for more people to upgrade from the free tier, but there may be something else coming soon that amplifies that strategy.
It’s been reported that the labels are pushing for the free tier to be for singles only that are past their release “window” (the amount of time after it’s been exclusive on the paid tier), and the rest of the album will only be available on the paid tier. Again, this makes total sense in that it’s another incentive to get users to pay.
Of course, should Spotify adopt that strategy, then you can be sure that the other streaming networks wouldn’t be too far behind.
It’s also been reported that the majors are pushing to up their stakes in Spotify in exchange for the new licensing agreements (yes, the majors all own a piece of Spotify), which could make them quite a bit of money when the company IPOs.
All this means that there’s a lot going on behind the scenes at Spotify and negotiations will get more intense in the coming days and weeks. The sooner this is all worked out, the sooner the company can IPO, something that the investors are pushing heavily for. This might not be the best thing for music consumers, but reconfigured Spotify tiers will be better for artists, labels and publishers in the long run.