Spottify making moves on iTunes and earning revenue for record labels

Posted on 23 January 2010
By Pierce King
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Popular music streaming service Spottify has yet to enter the US market, but in Europe its already offering sustainable revenue to the labels it’s made licensing deals with.

SVP of Digital for Universal Music Group International Rob Wells revealed some of the financial details of the licensing agreements it has with Spotify for the first time.

In the UK and Spain, Spotify pays a per stream royalty for each track users listen to. In its other four territories (France, Sweden, Finland, and Norway), the labels instead get a cut of the revenue generated from subscriptions and advertising.

Wells said: “That to me equates to a sustainable business model.”

Spotify only needs a 10-12 per cent conversion rate of free to paid users in any given territory to give the labels a decent return.

Wells also revealed that Spotify was the fourth largest digital partner in terms of revenue contribution in 2009.

The top three weren’t named, but it’s likely Apple’s iTunes and Google’s YouTube are among them. Spotify has already taken over iTunes in terms of revenue contribution in its native Sweden.

The service is expected to launch in the States sometime in the first half of this year..