Apple is reportedly pushing music labels to denounce Spotify’s freemium platform, allowing all music to be available through paid streaming services like its own; coming in June.
It is in talks with several music labels to move away from Spotify, offering high revenue per listen incentives. Jay Z recently said the same thing with Tidal, that artists should be paid more for their work, signing exclusive contracts with 16 artists.
The Apple plan does not sit well with the Department of Justice or Federal Trade Commission, who are both looking into the plans to shut down Spotify. It reeks of the same anti-competitive move Apple tried against Amazon in the infamous e-book case, where Apple, book publishers and other retailers forced Amazon to raise prices.
This lead to major repercussions, including Apple having to pay millions in fines for trying to shut down Amazon. The same could happen here, especially if Apple is successful in winning over the music labels, most of whom are unhappy with the current state of Spotify’s freemium platform.
Spotify has two tiers: free and premium. Free allows users some of the features and plays an audio advert every few songs for 15 to 30 seconds. Premium removes the ads and allows the user to have full control over playlists and album switching.
Apple’s own Beats Music platform is likely to not include a free tier, despite Apple siding with the freemium model for iTunes Radio. Instead, it will be available for £9.99 per month, or £14.99 per month for a family account for up to four devices.
What has not been documented by many music labels is the success of Spotify’s ad revenue in the past two years. In 2014 alone, Spotify’s ad revenue increased by 380 per cent, showing a real value to the freemium service (opens in new tab).
Spotify has 60 million active monthly users, 15 million are paying for the service. It recently completed a funding round with Goldman Sachs, valuing the company at £5.2 billion (opens in new tab).