Industry experts are of the opinion that Spotify should make its massive user base start paying for streaming music, or else it could go out of business within a year or so.
They were reacting to claims made by Spotify’s founder Daniel Ek, who in a letter to The Times said that the industry essentially had to change the manner in which they charged for music tracks.
As of now, Spotify lets its users enjoy streaming thousands of tracks for free if they allow for regular adverts alongside, and offers ads-free music service for the premium members who pay £9.99 per month.
But experts believed that such a proposition, which involves heavy reliance on advertisements for funding, won’t be lucrative for Spotify in the long run.
Another report published by the Guardian showed that the UK’s most popular digital music service is making significant losses per month to make the streamed data available to its millions of users.
However, Daniel Ek responded to industry’s claims by saying, “The notion of overnight success is very misleading and actually rather harmful to any hope for long term and sustainable growth in this industry”.
In any case, it appears to be high time for the senior executives at Spotify to prove the financial effectiveness of the service, and try to come up with a more profitable business model.
Like other fast rising starts - Twitter for example - Spotify needs to come up with a sustainable business model if they want to survive in the long term. Spotify has already managed to burn some cash, especially as it has to pay millions in terms of royalties and other related expenses, significantly more than Twitter and other startups.