Et tu, Spotify?
Digital Music News first reported this a full year ago, citing sources who were obviously well-informed. But that’s a gripe for another time: this morning, the New York Post reported that music streaming leader Spotify is planning to limit some newer, high-profile releases to premium-only subscribers.
So, Spotify will be releasing lots of brand new music, which is always a good thing, but not if you’re a free subscriber to the service. That’s right, fans are going to have to pay.
What are the details? Those are still, after more than a year, still taking shape. We first reported back in August:
“Sources cautioned that details on what exactly constitutes ‘premium-only’ or ‘gated’ remain unresolved, and a number of variations are in play. In one scenario, free users would only have access to one or two songs from a high-profile album, while paying subscribers could listen to the entire release without restriction.”
There was also a second model under discussion in which content would be limited entirely to premium subscribers. Another one would have “time-restricted exclusives for paying subscribers.” This seems to be what Spotify is aiming for, as the New York Post writes that the Swedish company, under tremendous pressure to create long-term deals with music labels in order to put off a “months-long impasse,” is willing to put in the “windowed” model similar to Hollywood releases.
In this translation for streaming music, big releases would be paid only for a time, then free after a substantial wait.
Spotify is currently operating on “rolling month-to-month” contracts with the big three music companies: Universal Music Group, Sony, and Warner Music Group. Currently, Spotify pays out the big three labels around 58% of revenue. Sources close to the company told the Post that Spotify wants to lower its revenue split, and “make its finances more attractive to potential investors,” with current gross margins around 20 to 25%. Its rival, Apple Music, enjoys a much higher gross margin of close to 40% according to a Bloomberg report.
Spotify’s new move seems aimed at two things: greater adoption of the premium tier and driving more revenue around music superstars.
Paywall image by aπ, licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0).
I had to check the date of my calendar to make sure it wasn’t April 1. I think this is excellent news, and I applaud the labels for sticking to their guns about this. This is going to result in a significant increase in subscription revenue. When subscription revenue increases, so does the royalty pool used to pay artists and songwriters. As a result, EVERYONE gets paid more money per stream, rather than just the superstars.
Forget about Spotify, forget about YouTube — everything’s about TWITTER now!
Thanks for the heads-up. We’ll get right on it? To whom shall I credit the source in the upcoming article?
It’s on Twitter’s blog — no need to credit Variety:
And it really, really sounds fantastic — a significantly better paying video service, combined with an outstanding social network (compared to YouTube’s terrible comment system). And no, I don’t work for Twitter, haha.
It’s funny how I never care about the artists who refuse to allow their music on Spotify because of the free tier, or the ones who end up as Apple or Tidal exclusives. And I’m already paying, so personally I’m fine with this. The new model will be good if it manages to make more music available on Spotify, as long as it doesn’t backfire somehow. I can’t wait to see how many mainstream artists will demand to be placed behind the paywall.
There’s a reason why Spotify is pushing back on this. They know that once an artist is disallowed from free, people go to YouTube. So, how can the labels allow YouTube to do this, and not Spotify, when Spotify is paying so much more for the rights? It doesn’t make sense.
Some people who currently don’t have a paid Spotify subscription will sign up for a subscription, and some will go to YouTube. I think the increase in subscription revenue from the former should make up for the loss in ad revenue from the latter (which isn’t that much to begin with).
Spotify also has the advantage of convenience, superior audio quality, and not losing tracks in a playlist due to DMCA notices.
That said, this will work a lot better if DMCA is amended so it has a “staydown” provision. But I think Spotify will be ok, and might actually benefit from this.
Not enough. Real windowing means no AirPlay for two weeks. This is a BS concession that could have been made years ago.
If only they had been interested in getting paid subs, not just IPO numbers.
If by windowing you mean making available only for paid download and physical CD for an initial period then this is flawed. As a paying subscriber to a streaming service I feel cheated buying a CD or paying to download an album on release day, only to then pay again when it comes to streaming. Isn’t that double royalty dipping?
Does a Netflix subscriber also feel cheated having to see new releases at the movies, or later buy a DVD/Blu Ray before it eventually becomes available for streaming?
Paul, you lost the spotify battle and bets. Get over it.
And to whoever thinks twitter is competing, I have 2 bridges for sale—dirt cheap…