Spotify looks for scale with Yahoo deal, including rev-share

Any freemium business is only as good as the size of its funnel bringing in new users. Spotify just widened that funnel with a high-profile deal with Yahoo, starting with Yahoo Music before expanding across its other sites. Flagged as a “global content distribution and promotion agreement”, it will see Spotify’s play button used to provide streaming music for Yahoo users, although they’ll have to download its desktop client first.

The announcement of the deal made much of its potential scale, with claims of Yahoo’s ‘Media Network’ reaching nearly 700m monthly unique users – “over 47% of the total worldwide Internet audience”. Yahoo remains a big web property, despite a perceived fall from grace since its portal-powered heyday, and a gradual slide in the relevance of Yahoo Music itself.

Two interesting things about the partnership. One: Yahoo says it’s getting a revenue share for new paid subscribers that it sends to Spotify: “We’re participating in providing content, and we’re participating in revenue as well,” SVP Jim Heckman tells All Things Digital. Could a fully-fledged affiliate scheme be on the way for Spotify, including for its desktop apps platform?

Second, reports suggest Spotify is dislodging Rhapsody, Yahoo’s previous streaming music partner. Rhapsody has moved quickly to deny claims that it’s a blow. “Yahoo! has been a longtime Rhapsody partner, and we will continue to market the Rhapsody service throughout the Yahoo! network,” says president Jon Irwin. Yet there’s clearly a parting of the minds at work: “Offering free playback of full tracks on Yahoo! would not align with our dedication to providing a paid, high-value music experience.”

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