Spotify may be regarded as the titan of online music streaming, but the company's walking a tightrope when it comes to turning a profit. That's why UK-based Spotify plans to talk with three major labels—Warner Music, Sony and Universal—it's determined to lower those licensing costs, and believes it could garner more mobile subscribers if only those labels offered "more of a taste than the current 30 day trial," writes The Verge's Greg Sandoval.
According to Sandoval, 70% of Spotify's revenues goes to licensing fees while another 20% covers customer acquisition. The leftover 10% goes toward other costs, including the company's well-received platform. Rate negotiation could free up more capital, while extending the ad-supported free tier for mobile might convince more customers to convert to a paid subscription. Neither strategy's a sure bet, given some popular artists' reluctance to stream their music at all and customers' unwillingness to pay for something they can get for free. But it's hard to imagine Spotify would go under, given how many industry insiders want it to succeed. As Sandoval points out, it isn't likely Spotify will walk away without a deal.
[via The Verge]
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