Spotify considers limiting free music

Labels want more people to pay for their streams...

Spotify considers limiting free music

Edward Smith / EMPICS Entertainment

Spotify is bogged-down in renegotiating licencing deals with the 'big three' in the music industry - and record company executives are pushing for one big change.

Music firms are asking the Swedish company to hold back new releases from their free service, giving users more of an incentive to signed up to (and pay out for) its premium options.

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That's according to sources close to the talks who have been speaking to The Financial Times.

During a 'windowing' period new albums would only be available to paid subscribers.

Spotify founder Daniel Ek has argued that offering all of its music to 'free users' attracts more people to its platform - who will later pay for the subscription service.

In exchange, Spotify is set to pay lower royalties to record companies.

These payments have been a source of controversy as artists have complained about the low payments which they receive.

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To counter this, Spotify has highlighted the high total royalty payments that it makes to record companies. This is cited as one of the reasons why the firm is yet to register a profit, despite its position as the leader in the music streaming market.

Spotify was recently valued at $8.5bn (€7.9bn) - but it ended 2015 with a net loss of €173m as it raised revenues of €1.95bn and faced distribution costs and royalty fees of €1.63bn.

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The vast majority of Spotify's 30 million-plus song library comes from these three companies.

Earlier in March, Spotify announced that it has sailed passed the milestone of securing 50 million paying users - it passed the 40 million mark in September of last year.

That was up from 30 million in March of 2016, suggesting that the company is experiencing rapid growth, even as competitors like Apple Music try to eat into its lead.

Last summer, the company announced that it passed 100 million active users when non-premium accounts are included.

The Swedish firm has more than double Apple Music's user base.

Facing major loan repayments, the company may be tempted to go public in 2017 - and securing this deal would be a major step towards this goal.