Despite years of unwavering rhetoric, Spotify is said to be considering a loosening of its tight hold on the freemium model.
A source tells Billboard that a premium-only window of availability was considered for Coldplay’s A Head Full of Dreams, released this past Friday, though Jonathan Prince, Spotify’s global head of communications & public policy, says it was “ultimately decided, together with management, that Coldplay and its fans would best be served with the full album on both free and premium this Friday.” Prince says the company stands behind its current model “100 percent.” As of March this year, premium subscribers accounted for 91 percent of the company’s revenue.
The news was first reported by the Wall Street Journal, though Billboard has not been able to verify any points made except that the strategy was considered for Coldplay’s recent release. A source at one major label tells Billboard that, while they have no official information on whether Spotify is seriously considering a windowing strategy going forward, they believe the Journal’s report to be accurate.
The premium window would seem to make most sense for the transition to streaming of Adele’s 25, which has been kept off all on-demand services since it was released on Nov. 20. When contacted, Beggars Group, parent company of Adele’s label XL, refused a request for comment.
If it’s true that Spotify is considering giving some artists “special treatment” as described by the Journal, the two-class system could present problems for both labels and Spotify. Independent labels would not want to be excluded from opportunities given to larger labels to pick and choose which releases to window. Conversely, if the windowing strategy were made available to all, Spotify would have given up a key aspect of its business model and lost what it considers to be a productive customer acquisition tool.
There had been talk earlier this year of Spotify adopting a similar approach to Apple Music — three months of free listening, after which fans can pay, or not play — though those talks never materialized in a change to company policy.
Lucian Grainge, chairman and CEO of Universal Music Group, began rattling his saber against freemium about a year ago, culminating in the exit of two senior digital executives at the company, reportedly over their dissent on this issue. As Billboard wrote in March:
… others insist the directive comes from chairman/CEO Grainge, who wants individual labels to “have skin in the game in terms of the digital strategy,” according to one source, and be involved in cutting deals with digital music services. At the heart of his business ethos: “Freemium” doesn’t fly.
Despite the heavy pressure from Grainge, Taylor Swift and innumerable industry sofa referees, Spotify has remained steadfast. Jonathan Prince has repeatedly reiterated the company’s position: “If you want subscriptions, why on earth would you cut off the pool that you’re getting subscriptions from? If Spotify Free ended, 86 percent would go to other free services, only 6 percent would convert. There’s no reason to expect they would stick around.” However in the U.S. YouTube remains the only wholly free service — and a large one at that — outside of Pandora (which doesn’t allow listeners to choose the music they’re hearing beyond a “seed” pick, after which the company’s algorithm takes the steering wheel).
It’s important to remember that YouTube casts a giant shadow, and the company has made it abundantly clear that any content appearing on its premium Red tier will — eventually, like Spotify’s agreement — appear on the free tier. Deezer outside of the U.S.
“The problem is, Daniel is so evangelical about the process, you can’t change his mind,” one high-level label executive told Billboard in a June cover story on Spotify CEO and co-founder Daniel Ek. The exit of Ken Parks in October, Spotify’s chief negotiator with the labels throughout much of its growth, may have something to do with the change of heart by the world’s largest streaming company.
Additional reporting by Glenn Peoples.
Updated, 6:02PM, Dec. 8: This report was updated to reflect new details on the windowing strategy provided to Billboard.