The Verge wrote today that Spotify is in the process of renegotiating its deal with the US record labels.
Those negotiations are reportedly focused on 2 areas: first, Spotify wants to lower the royalty payments that it makes to the record labels into line with its revenues. Secondly, Spotify wants to make its free, ad-supported tier available on mobile platforms, such as the iPhone.
The second point is exciting. If I could access and control Spotify from my iPhone, then essentially every song ever written would be available for streaming, at all times.
Moreover, this would (potentially, perhaps even likely) allow control of Spotify over AirPlay - maybe natively within the app, or if necessary, by double-clicking the home button, swiping to the left, and AirPlay streaming the entire iPad or iPhone.
All of that excitement comes with quite a few troubling caveats, though. The first point, re: royalty payments, for instance. It's been reported for some time that artists really aren't making any money at all from Spotify streaming.... and now we've learned that Spotify isn't making any money either, and wants to lower those royalty payments for streaming.
The idea, presumably, is that the everyone will make up the difference on volume - for the artists, adding mobile devices opens new avenues for people to stream music, which will increase clicks, which will increase artist revenues, even at a lower royalty per click.
For Spotify, if the royalty payments are lowered to the point that streaming is profitable, then more streams = more ads, which equals more profit.
Or, the whole thing could come crashing down. If the labels decide that Spotify and services like it are responsible for cannibalizing paid downloads, they may refuse to allow these proposed changes, or impose new restrictions on free accounts (i.e., one play per account per day, substantially more ads, or some such.)
Spotify has been a great tool for hearing new music, and its social functions (which are great) have been the first implementation of a social music network that I can remember really working.
But even as a huge Spotify enthusiast, I can see the potential for "free riders" as a burden on the system, streaming the same albums for months on end, with little to no compensation going to the artists. It's difficult to find the correct balance, and I'm hoping that Spotify can find a way to be profitable while getting artists paid.
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