Spotify May Cut ‘Freemium’ to Three Months, Sources Say…

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Spotify may soon be limiting its free, ad-supported access to just three months, instead of its open-ended, unlimited freemium access plan currently, according to multiple sources to Digital Music News.

The three-month ‘proposal,’ advanced most principally by major labels Universal Music Group and Sony Music Entertainment, would allow current, free-access, ad-supported (or ‘freemium’) subscribers to continue their plans for 6 months, while new users would be limited to three months only.

“It’s weaning them off free, is one way to think about it, while making [Spotify] more in line with [other streaming services],” one source with knowledge of the discussions shared.

Spotify is apparently disinterested in curtailing freemium at all, and has advanced the idea that its freemium-to-premium migration path is working.  But at “just” 15 million paying subscribers, major label decision-makers remain less-than-swayed, and Spotify’s power in the negotiations has its limitations.  Indeed, without cooperative licensing from the major labels, of which there are three, Spotify would essentially become crippled.  That would explain why Spotify has offered massive cash advances, substantial equity stakes (up to 15 percent across the majors), or both to secure major label licensing for its service.

The three-month plan would also allow a number of artists and labels to extend past three months, if they so choose. Those artists would be grouped into ’emerging’ or ‘up-and-coming’ playlists, similar to an idea being drafted at Apple for its upcoming streaming service (now simply called ‘Apple Music‘). That, coupled with an open-access, non-interactive radio feature, is designed to preserve some of the free-access while encouraging a faster migration towards paid, premium monthly plans.

Digital Music News could not ascertain whether superstar artists will be allowed to limit freemium access entirely.  Previously, refusals by Spotify to allow paid-only access caused high-profile artists like Adele and Taylor Swift to walk.

The seriously curtailed window is being presented as a ‘proposal,’ but one source pointed to limits on the “spirit of collaboration” being floated.  “This was drafted as a sort of compromise idea in mind,” one source described to Digital Music News, while also noting that “close observation” will determine if users are pushed towards premium plans more aggressively.

“But, in all reality, remember that [Sony Music Entertainment CEO Doug] Morris and [UMG CEO Lucian] Grainge aren’t really asking as much as they’re telling.”

A separate source, also with knowledge of the conversations, noted that Warner Music Group is privy to the discussion but is curbing its enthusiasm on it.  “There’s the piracy problem, of course,” the second source noted. “You have to realize that but also think about the role YouTube is playing in all of this, so Warner is nervous that this is not really going to work out and that YouTube can’t really be controlled.”

That sideline-standing stance comports with comments made by Warner Music Group CEO Stephen Cooper at a recent investor call.  “You know to be crystal clear, piracy is zero revenue, it’s the theft of intellectual property, and it’s not good for anyone,” Cooper calmly stated.  “So all of these models are better than piracy, that’s number one.

“So I think that before people conclude that freemium should be burnt at the stake, we should think very carefully about the consequences.”

Unknown is the level of participation on the three-month proposal from Merlin, a consortium of leading independent labels.  But chances are, they’re not fans.  “Treating consumers like children and telling them that everything they’ve enjoyed about these streaming services is going to be taken away because the biggest record companies don’t like it, that’s another Napster moment,” quipped Charles Caldas, the CEO of Merlin Network.

“The major labels screwed Napster and screwed the market by killing what was potentially the biggest opportunity the industry could imagine in getting into the digital space early. If they follow through with this, they are going to do it again”.

 

More as this develops.

Image by Kevin Dooley, licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0).

26 Responses

  1. Adam

    Won’t happen. Your sources are using you to negotiate in the press.

    Reply
  2. Anonymous

    “So all of these models are better than piracy, that’s number one”

    You can repeat this as often as you want to, but Spotify’s freemium model still doesn’t work unless you’ve got a Warner-sized catalogue.

    iTunes+Pirate Bay [income+no income] is better than Spotify+Pirate Bay [no income+no income].

    And those are your choices.

    Reply
    • thenamesmas

      Or, when consumers get tired of getting taken for a ride by Apple, particularly if they live in a country that’s not America ($17 albums, anyone?), we’ll be just looking at:
      Pirate Bay [no income whatsoever]

      Suddenly, the prospect of Spotify+Pirate Bay [Still some income] looks far more appealing.

      Reply
  3. Anonymous

    So uh, what’s stopping someone from creating a new account every 3 months and simply sharing their playlists with their new account?

    Reply
    • Sarah

      Spotify is going to ask them to pretty please not do that.

      (But requiring credit cards for the free period would cut down on the majority of that.)

      Reply
    • Sam

      Nothing. And…big deal. The number of people who will do that is small enough to where we’re still better off. Of course by “we” I mean us that make the fucking music, not those who feel entitled to it.

      Even if millions of people do that – and that’s the kind of number that will get thrown around to generate fear – right now 30 million are taking free music. A few million doing it because it got taken away – big fucking deal. In comparison – that’s a big win for people who make music.

      It’s the same thing they do with piracy. They talk about the millions of people who steal music if there’s no free streaming. So what? They pay ALMOST the same. And by millions – they’re still talking about a very small number compared to the millions and millions that Spotify is giving the music away to.

      Reply
      • Anonymous

        How many FB fans do you have and/or how big is your mailing list?

        Reply
      • Tom

        Spotify is a service that provides content without charge in return for the user also receiving advertisements. It’s basically the same deal as radio. Or broadcast television.

        Reply
      • MrG8000

        They aren’t “taking free music.” They’re paying for it by being subjected to advertising.

        Reply
  4. Sam

    Throwing a cup of water on your house if it’s on fire isn’t better than throwing no water at all. Now not only is your house gonna burn down, but you’re gonna be fucking thirsty too.

    Reply
  5. Musicservices4less

    I disagree with those who say there is no way to get Youtube’s blatant piracyish model legally under control. I believe there is the start of politicians and government administrators world-wide who are seriously looking at Google and its subsidiaries at different levels for abuses of a number of laws. It is just a matter of time before those people turn to the enforcement of copyright issues on the internet.

    Reply
    • Yes, trust the political process

      So maybe 10-15 years from now the politicians will slightly weaken safe harbor

      Reply
  6. Versus

    Good. Now let’s add 3 months of community service for pirates.

    Reply
  7. Anonymous

    Just posted an hour ago from MusicWeek.com

    “Spotify has debunked claims that it is about to limit its free, ad-supported access to just three months.

    A report on Digital Music News today claimed that the three-month proposal was being pushed by Universal and Sony as a way of weaning consumers off free.

    However, speaking to Music Week, Spotify has called the story “totally false”, adding “[Our] model is working”.

    The freemium model, which offers an ad-funded tier in the hope of up-selling users to paid for subscriptions, is one that appears to have divided top music industry executives.

    On Tuesday, Warner Music Group chief executive Stephen Cooper urged people to “think very carefully about the consequences of burning freemium at the stake.”

    Universal boss Lucian Grainge, on the other hand, said at this year’s Code/Media conference that “the ad-funded part of the music ecosystem – that’s on demand, ad-funded – as I’ve said before is not something that’s particularly sustainable in the long term.” “

    Reply
  8. NG

    £10 month in UK is just a bit steep for what is basically a radio! I would happily pay inline with Netflix

    Reply
  9. ssdsa

    if you love listening spotify, come and listen spotify premium free. listenspotify.weebly.com

    Reply

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