Major Labels Like Universal Reportedly Looking to End Spotify's Unlimited Free Streaming

If you are one of the millions who relies on Spotify to stream music for free, your unlimited access may soon be restricted if the major labels have their way. This according to a new report from the Financial Times ,via The Verge, that says Universal Music Group is trying to leverage its current contract negotiations, which Spotify said it would make the company $1 billion in revenue, to restrict the free service.

The goal of these restrictions would be to make using the free service so prohibitive that it would convert the users into paid subscriptions, which costs $10 per month and generates significantly more revenue for the recording industry. Paid subscriptions accounted for $800 million in U.S. record industry revenue in 2014 alone, while ad-supported equaled $294 million. They grew 25 percent and 34 percent from the previous year.

Lucian Grainge, chairman and CEO of Universal Music Group, made his concerns public about the "freemium" model last month, when he said, "Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors."

This sentiment is not just being felt by UMG. According to unnamed Rolling Stone sources, "most" major labels are expressing their concerns about the financial viability of unlimited free streaming.

"We need to accelerate the growth of paying subscribers -- that's a slightly more positive way of saying we need to limit free," says one RS source at a major label.

This about-face is in contrast to the major's prior stance on streaming. They have been supportive in the past and have been helpful in cutting deals that have allowed the companies to stay above board. But the new stance could be harmful to a streaming industry that is just starting to pick up steam. The Swedish streaming giant is accelerating its conversion rate from free to premium, having just surpassed 15 million paying users.

A Spotify representative told the FT, "Spotify is monetizing people who have never been monetized before."

While the concern seems to be on the artists, labels and investors and they deserve to have their voices heard, there seems to be little thought for the consumer. We will see how this plays out as Spotify continues to negotiate its new deals with the majors.

Tags

Spotify, Universal Music Group