As Spotify moves into its second decade of operations, there’s no doubting its strong position at the head of the increasingly-vital music streaming pack, but finding a way to shape such an outwardly successful model into a profitable one is proving harder than many would have expected.
With streaming numbers through the roof, new records being broken each month (although mostly by Drake and Ed Sheeran), and paid subscriptions having ticked past the 50 million mark, Spotify is nonetheless having to pay upwards of 70 percent of its revenue to record labels and publishers in order to keep the taps running hot.
With such monstrous overheads, the question that remains is how Spotify will manage to pivot from here to become a viable platform in the long-term.
Last year, it was suggested that negotiations with the labels to reduce their take had failed. What if, then, Spotify were able to take the likes of Warner, Universal and Sony out of the equation with their own label of sorts, and keep a tight fist on those profits?
It would certainly help to improve the tenuous chances of profitability that loom over its ongoing hopes of an IPO, and, according to new reports, Spotify is ready to stop working with the labels and instead start competing with them directly.
Rumours have been swirling for a while now that Spotify is approaching artists with deals that resemble something they’d find at a label, allowing the streaming platform a percentage of their revenue, and effectively recouping a slice of the hefty royalties they’re required to pay.