A new report from Bloomberg has revealed streaming giant, Spotify, plans to increase revenue by creating a ‘two-sided’ business model.
Finance and markets site Bloomberg reports that Spotify is asking the music industry to pay for promotion within the platform. In an effort to increase profitability, the streaming company wants labels and artists to pay for increased site visibility and promotion to subscribers.
Despite generating huge amounts of income ($6.1 billion in sales last year according to Bloomberg), Spotify has famously struggled to make their business model generate a profit as almost all of their income is paid out to rights holders.
The streaming giant wants to increase their revenue by developing their ‘two-sided’ model, where they receive income from both the consumers and producers of music. Some have criticized the move as an indirect cut to royalty rate while suggesting slow advertising sales are a large factor in their decision.
Spotify already has an advertising tool called Marquee which with a minimum buy of $5000 promises to increase stream counts. It sends notifications to listeners when new products are released, targeting coveted subscribers as well as free users and Bloomberg report that Spotify has been impressed with its results.
Paid-for advertising within the app will inevitably add to on-going concerns from some parts of the industry about the nature of the streaming model, with fears that such a system would inevitably favour labels with the biggest financial clout.