Rob Wells, the senior vice-president Digital for Universal Music Group International gave us a little look at Spotify’s business model, declaring it a success that’s making the major label a nice slice of cash.
He tells us Spotify is paying Universal Music Group a royalty per user in only two of its territories: the UK and Spain. In Sweden, Norway, Finland and France, Spotify pays the record labels from the money generated by subscriptions and advertising and not on a per user basis.
Wells explains Spotify must only convert between10-12 percent of its user base in any one territory into having subscriptions in order to make enough money to pay the labels.
However, switched-on UK users are tending to simply using the service for free, prompting the service to once again become ‘invite-only’ in that territory.
Spotify was Universal Music Group International’s (which covers all territories bar America, Canada and Mexico) fourth largest digital partner last year in terms of the amount of revenue it generated for the company. Industry sources reckon iTunes and YouTube are the other top performers.
Spotify has already taken over iTunes, in terms of revenue levels, in its native Sweden. Per Sundin, head of Universal Music Group in Sweden, told The Swedish Wire last year: “In five months from the launch Spotify became our largest digital source of income and so passed by iTunes.”
Spotify takes on iTunes directly when it launches in the US this year – even as Apple prepares to introduce iTunes.com music streaming there this June.