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Spotify reveals record company deals

Music streaming service Spotify has lifted the lid on just how much cash it is generating for its European music labels, and the numbers seem to prove that the 'freemium' model can really work.

According to figures obtained by Music Ally, since the service launched back in October 2008 it has sent some €40 million to rights holders throughout the seven European territories in which it operates - the overwhelming majority of which came during 2010, when the company paid out €30 million in the first eight months alone following a massive upswing in its popularity.

Those are some pretty big numbers, but a more surprising revelation comes courtesy of Swedish media group Dalarnas Tidningar. In an interview with Jacob Herbst, digital sales director at Sony Music Sweden, it was revealed that Spotify is "on track to become the largest single partner we have," eclipsing the payouts from pay-to-keep services such as Apple's iTunes and Amazon's MP3 Store.

Even more impressively, Herbst reveals that some artists on the Sony label make around 80 per cent of their revenue from Spotify alone - proof, if proof were needed, that a streaming model can work for both the consumers and the artists involved.

For those unfamiliar with Spotify's business methodology, a primer: the company offers a music streaming service where you can search its archives of thousands of songs for anything that takes your fancy and listen to it completely free of charge - but it will interrupt you every few tracks to play you advertising, much like a commercial radio station.

The real money, however, comes from the 'Premium' account holders, who pay just shy of £10 per month for advert-free listening plus the ability to download songs for local playback.

This so-called 'freemium' model has proven extremely successful for the company, with Spotify's memberships rocketing at the start of 2010 and no slowdown evident - although the high costs of running a streaming media service coupled with these bumper payouts to artists do leave some in the industry questioning whether the company can manage to turn a workable profit for itself.