Will Spotify’s 100m-users milestone give it more clout when negotiating licensing deals with major labels? Edison Investment Research analyst Richard Windsor made exactly that claim yesterday. “100m is significant for Spotify because this is the point at which the balance of power between it and the record labels begins to shift. Spotify has to pay away 70% of the revenues that it makes to the record labels and this is the single biggest reason why the company is still losing money,” said Windsor. “This split is historical and comes from a time when revenue from streaming had no impact on the total level of music sales for the industry. However in 2015, streaming single-handedly kicked the music industry back to growth underlining its growing importance. Furthermore, Spotify is rapidly reaching the point at which the record labels will need Spotify more than Spotify needs the labels. At that point, negotiations with the labels will have a very different tone and this is when gross margins will begin to improve.” With Spotify currently in a rolling month-to-month contract with majors in advance of its next set of licensing deals, we’ll soon find out how right (or how wrong) he is.
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Tools: Kaiber
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