Spotify is trying to renegotiate streaming contracts


The Wall Street Journal is reporting Spotify has been on month-to-month contract extensions with the major music labels for nearly a year. The company is trying to negotiate new long-term deals as it prepares for an IPO next year. The problem is Spotify is trying to pay less while the labels want them to more.

Spotify, which saw its net loss increase to roughly $200 million last year even as revenue doubled to more than $2 billion, wants to pay a smaller share than the nearly 55% of its revenue that it currently pays to record labels and artists, according to people familiar with the matter.

It pays roughly an additional 15% to music publishers and songwriters.

But some major label executives want Spotify to pay them as much as 58% of revenue from both its free and paid tiers. That is what Apple Inc. pays for Apple Music subscribers who aren't on free trials, people familiar with the matter said. Apple has more than 5 million users on free trials, they said.

Reportedly the labels may make compromises if Spotify is willing to put limitations on its free tier. Specifically the labels want the ability to offer new music only to paid subscribers, among other things.

Apple has been ramping up Apple Music. A major refresh of the service is due this fall to address complaints over user friendliness. Apple has also been aggressively seeking exclusive content and developing its own original content to help drive subscriptions.