Are the majors pressuring Spotify into limiting free streaming?

Wheels have been set in motion to re-design streaming models with Universal apparently leveraging its current negotiations with Spotify.

The recorded label industry is currently questioning the ‘freemium’ model used by streaming services to bring billions of dollars in revenue from ad-supported streaming and to help demolish piracy in territories such as Scandinavia and Spain. Now, as Spotify undergoes its round of licensing renewals, the Financial Times has reported Universal is pressuring the service to apply harsher limits on its free model.

While Spotify has told TMN in the past it will always feature a free model, Universal apparently hopes it can push Spotify to drive more free users towards the premium-only, $10 a month, business model.

The drive away from ‘free’ follows CEO Lucian Grainge’s comments at Recode’s Code/Media conference: “Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors,” Grainge said.

The other two majors have expressed concerns over the ‘freemium’ model; in December last year Warner Music CEO Stephen Cooper said: “We continue to believe that the long-term sustainability of the “freemium” model is predicated on high levels of conversion from ad-supported “free” to paid subscription. Of course, in order to achieve those levels, the benefits of paid subscriptions must be clearly differentiated from the ad-supported offerings.”

Sony Music chairman and CEO Doug Morris told Hits Magazine earlier this month that free music was detrimental to the music industry: “Basically, I equate ‘free’ with the decline of the music business. Why should anyone pay for anything if they can get it for free? In certain instances, it’s worth a discussion.”

Artists including Bjork, Taylor Swift and Aloe Blacc have all publicly expressed the opinion that streaming services need to pay songwriters fairly, calling out services which allow unlimited free on-demand streaming (like Spotify).

Meanwhile, YouTube’s Music Key service is exploring a focus on ad-free, paid content and Apple’s incoming into streaming in June with an overhauled version of Beats Music will have a paid ‘industry standard’ tier price of $9.99.