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Spotify cuts free music access in apparent effort to appease labels [Updated]

April 14, 2011 | 11:28 am

Daniel_ek_and_martin_lorentzon-6

Spotify, the popular European music streaming service, on Thursday announced it will limit how much music subscribers can access for free.

Beginning May 1, non-paying subscribers will be allowed to play a particular song five times. In addition, each user will be limited to 10 hours of free music a month. Non-paying subscribers had been given virtually unfettered access to 10 million tracks in exchange for listening to advertising.

Spotify, which operates in Europe, also has more than a million subscribers who pay roughly 10 euros a month (about $15) for premium, ad-free, on-demand access to music. Those subscribers will not be affected by the changes.

The announcement comes as Spotify continues its protracted negotiations with major record labels to launch in the United States, the world's largest market for music.

Music companies have been reluctant to grant Spotify U.S. licenses to their vast music catalog, fearing that Spotify's free ad-supported streaming service would cannibalize sales of song downloads. Though Spotify shares its ad revenue with its partners, the labels have regarded the amounts as insufficient to warrant endangering its largest and most lucrative market.

EMI and Sony have already consented to give Spotify licenses to operate in the U.S., but the Swedish digital music company still needs cooperation from Universal Music and Warner Music groups.

“This was a predictable move," said Adam Klein, chief executive of eMusic, a rival digital music service. "Their previous offer, while great for consumers, was not a sustainable business model.”

In a blog post to users, Spotify co-founder Daniel Ek argued that the limits will not impinge on listeners' ability to "discover" music, language that seems designed to appeal to record labels that want consumers to either pay for a download or upgrade to the premium service, where music companies receive higher compensation.

Spotify's spokesman, Jim Butcher, said the company is still committed to the free service, which is viewed as the primary gateway to getting its audience to open up their wallets for the premium subscription.

"The balance of paid users to active free users is actually 15%, which is phenomenal for a freemium business," Butcher said. "The free service gets users engaged with the service like no other. The number of subscribers we've attracted speaks for itself."

Now let's see whether the labels are listening.

-- Alex Pham

Updated: This post has been updated to include comments from a Spotify spokesman.

Photo: Spotify co-founders Martin Lorentzon, left, and Daniel Ek. Credit: Spotify.

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