Name: Spotify Needs to Pay Record Labels More Money
Uploaded: 2016-08-24
Duration: 2 min 32 s
Description: In order to keep them happy

A head of an IPO, Spotify's freemium business model is under scrutiny. Robert, should Spotify pay record labels more money? Yes, it should pay record labels more money, it's about time. This is a big company, it's eyeing and IPO for next year, and it needs to start growing up. Now is the time, yeah. Spotify pays record labels 55 %, whereas Apple Music, one its big competitors pays the record labels 58 %. That's a three percentage point difference. Yeah. It's about time that it started matching that Or else where's this thing gonna go? Well, think of the investors, okay? Are investors gonna be happy with Spotify throwing even more money out the window toward the record labels? No, I mean, you've said it yourself, Spotify is unprofitable and it It's prepping for an IPO. I mean, look, I should add by the way, some of its investors are the record labels. That's true. This whole thing is kinda circular but the truth of the matter is if it's prepping for an IPO, it needs to come to market with good business fundamentals Digging itself a deeper hole is not the answer. It certainly does, but I mean Spotify it makes billions of dollars in revenue every year but yet at the same time it's losing hundreds of millions dollars per year. That is not a recipe for success if it can't start generating the money it needs. I think the solution here is that Spotify needs to start forcing people to subscribe to its service. It needs to start converting more people into paid subscribers. Mm- hm. The free ride is over. This is really rich for you to say. Because I know for a fact you're actually one of those freeloaders. This is true I'll admit it. I am proudly. You use free Spotify. I certainly do. That's neither nor. I'm not going to hold that against you. Look, let's focus on the freemium business model. Right? I think the freemium model works fine. But Spotify is not exactly number one in its category. It's not the number one streaming service. It's not number two it might not even be number three or number four depending on who measures and how. But the fact of the matter is if you're gonna try to extract demands from the record labels you gotta have to leverage. And right now Spotify doesn't have that. So I hate to say it, but if Spotify actually wants to do that, to see that long term revenue growth In the short term it might actually have to attract a lot more freeloaders and then convert them. This is a big service. They've got tens of millions of people on it, using it right now today. And plus, look, if this company wants to get the music that it wants on its service that's going to attract those audiences They have to keep the record labels happy, and if they're going to do that sorry Daniel Eck, money talks. Fair point. You gotta pay up. For one show that's always free, come to Fortune. com for more tech debate.