Spotify will make some of its music available exclusively to paid subscribers, the Financial Times reports. The popular streaming service is reportedly close to signing a new set of licensing deals with major record labels that have been in the works for months now. The deals are said to help Spotify advance its ambitions to go public as the company is rumored to be preparing for an initial public offering (IPO). The Stockholm-based music service is reportedly trying to strike deals that will see it lower the royalty fees it pays to music labels, but in exchange, it will also limit some songs and albums to its paying customers, thus going back on its year-long policy that made many labels and artists unhappy with the company.
Spotify’s free plan generates revenue through advertising but it’s far less efficient than its premium subscription model, which is why music labels have been pushing for the company to limit some songs to the latter for years now. The popular streaming service has so far been unwilling to do so and has clashed with a number of major players in the industry as a result of that policy. Taylor Swift pulled all of her music from Spotify back in 2014 in protest of that issue and many other artists threatened to do the same. Following months of negotiations, Spotify could now finalize new music rights deals in the coming weeks, sources with knowledge of the matter claim, meaning the company might start limiting some music to premium subscriptions as early as this spring.
According to the report, music labels with whom Spotify will soon sign the agreements outlined above include Universal, Warner, and Sony, the so-called “big three” that owns the majority of the most popular music in the world. The service apparently conceded to some of their conditions as it’s looking to improve its general appeal before an IPO that it’s been rumored to be preparing for years now. While Spotify’s revenue has been growing at a rapid pace in recent years, the increase in royalty fees that followed its growth is still preventing the company from becoming profitable, which is a major issue that the firm needs to resolve before going public and trying to convince investors to purchase its shares.