Infinite Path

The hugely popular online streaming music service, Spotify, could be out of business in less than a year if it can’t make more of its users pay for the premium subscription.

The service currently has over two million users in Britain. However, only 10 per cent of that figure have actually subscribed to the premium service at a cost of £9.99 per month. The premium service allows users to access Spotify’s library of tracks ad-free. The users who do not pay for the premium service are shown ads while music is playing which is the other revenue model for the service. As is the case for many fledgling internet companies, on-site advertising is not bringing in the sort of revenue that was once expected and therefore more and more online businesses are going bankrupt when funding runs out.

Spotify has to work closely with the music industry. Music companies allow for their music to be played by Spotify users on the basis that they will get a royalty payment for each play. There is a catch-22 with the way the system operates. Music companies are keen for a service like Spotify to be in business. If people are using such a service, the number of illegal downloads will reduce. However, if the music industry puts too much pressure on the likes of Spotify – and squeezes more and more in the way of fees for music played – those companies have to charge their end user more for the privilege of listening to the music, which in turn forces the users back to illegal downloading because they are not comfortable with the high monthly subscription.

There must be compromise and cooperation between the music industry, and the companies who are providing an innovative platform for music consumption if illegal downloading will really die out. If the situation does not rectify, Spotify – and the other similar services out there – will be remembered merely as a stop-gap between traditional music sales from shops and illegal downloading from the internet.