‘Let’s not pull the rug from under Spotify’s progress’

The battle over freemium music is intensifying. The Financial Times reports that the major labels – led by Lucian Grainge at Universal Music – are demanding that Spotify places more restrictions on its non-paying customers in a bid to drive them to premium.

This comes after months of dispute on the topic. In November last year, in the wake of Taylor Swift’s decision to pull her catalogue from Spotify, Daniel Ek revealed that 80% of Spotify’s paying users started life on the service as freemium customers.

“No free, no paid, no two billion dollars,” he said, referring to the mountain of money Spotify had paid out to music rights holders since launching in 2008. At last count, Spotify boasted 60m active users, with 15m paying subscribers – meaning 25% of its customers are putting their hand in their pocket.

But in February, UMG boss Grainge argued the other side of the coin, claiming that free, on-demand streaming couldn’t “sustain” the music business. He advocated a mix of free radio and reduced-spec streaming services that more aggressively encouraged users to upgrade to a paid-for subscription.

This now appears to be what the majors are demanding from Spotify in their licensing negotiations, which are due to end towards the close of this year.

(Long-term freemium sceptic Lohan Presencer  – the CEO of Ministry Of Sound‘s label group – articulated similar thoughts with particular panache earlier this month during a Mobile World Congress debate.)

“Spotify’s freemium model is a success. It transitions casual fans from piracy to a monetised platform.”

James Sandom, Red Light Management

Some, however, think meddling with Spotify’s model at this stage is a fool’s errand.

Independent labels from across the world – including Beggars Group’s Martin Mills, [PIAS]’s Kenny Gates, Glassnote’s Daniel Glass and Kobalt’s Willard Ahdritz – told MBW about how impressed they had been by Spotify’s efforts to convert music pirates into legitimate consumers.

We know that freemium services – or perhaps more fairly, the free tier of freemium services – doesn’t pay big bucks compared to premium, despite attracting the vast majority of users. New RIAA stats show that 73% of on-demand streaming revenues in the US last year came from premium tiers, with 27% derived from ad-supported consumption.

What’s been missing in this debate so far, however, is a manager’s voice.

James Sandom (pictured) is co-founder of Red Light Management’s UK operation, and manager of The Vaccines, The Kaiser Chiefs, The Cribs, Temples and more.

He has responded to reports that UMG and the other majors are attempting to force Spotify to reduce their free offering, commenting: “Brute force won’t win the day.

“Every artist, artist manager and associated beneficiary in the recorded music industry would love to get paid for every individual ‘consumption’ of the music they’re involved with and invested in.

“However we would be mad to support pulling the rug from underneath steady progress on the grounds the big bad wolf needs to make more money faster.

“We would be mad to support pulling the rug from underneath Spotify’s steady progress.”

“Spotify’s freemium model is a success, it transitions casual fans from piracy to a monetised platform. To an extent it’s the key in the door.

“It would be crazy to end it now. The music economy has many tiers, removing the lower rungs of the ladder will simply mean less people climbing at all.”

MBW would love to hear thoughts from more managers on this subject. If you’ve like to give your view, please email enquiries@musicbizworldwide.com.Music Business Worldwide