Smartphones could get free Spotify streaming

It seems a strange thing to do on the face of it, but if reports are to be believed, Spotify could be offering its service for free on mobile platforms in future.

It's all down to licensing costs. According to The Verge, Spotify is due to meet the big labels soon to discuss licensing agreements already in place. Essentially, Spotify is planning on asking for 'substantial price breaks', as well as the right to extend its free pricing tier to mobile devices.

The problem for Spotify right now is profitability. About 70% of Spotify’s revenues goes to pat music-licensing fees while another 20% covers 'customer acquisition'. That leaves 10% to pay all of the company’s other costs, as well as attempting to make a crust. As you might have guessed, it's a model that doesn't quite work.

The industry obviously doesn't want to give up money easily, but Spotify does play a more significant role in the P&L these days, so the labels are willing to sit down and talk. When they do talk, they will also be asked to agree to an ad-supported free tier for mobile devices, going beyond a 30-day free trial.

Of course, that might well hit revenue for Spotify. After all, if it's free, why pay the cash to get the service? Spotify is probably banking on your average music fan wanting the added benefits of the premium service once they've had a taste - and those ads are really annoying, to be fair.

Time will tell, but it looks like free streaming is very likely to appear. Perhaps as soon as later this year.

Source: The Verge

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