Spotify‘s contracts with all three major labels are up for renewal, according to Music Business Worldwide. And while this doesn’t mean the streaming leader’s catalog is at risk of disappearing, the discussions now taking place spell out a new threat to Spotify: Apple.
As Spotify heads toward an IPO, the Swedish company is hoping to reel in its costs, namely the 55% of revenue it reportedly pays out to labels in music licensing fees. But in response to Spotify’s efforts to lower that number, the labels are said to be pointing to a new industry example: The more generous 58% reportedly paid out by Apple for its 14-month-old music subscription service.
Even though Spotify has vastly more users, Apple Music comes to the table with an advantage: piles of money from its enormous and profitable parent company. For Spotify, which currently loses money, Apple’s ability to flex its financial muscles—allowing it to pay out a higher percentage of revenue and score exclusives from big names like Drake and Frank Ocean—may prove the most potent competitive threat the company has faced yet. JPT