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August 24, 2016

Spotify shops around for music deals ahead of IPO

News: Spotify is looking to boost its profitability.

By Alexander Sword

Spotify is looking to negotiate new deals with music rights-holders as it gears up for a potential IPO.

The music streaming service aims to reduce the roughly 55 percent share of its revenues it currently pays to labels and artists, according to the report in the Wall Street Journal.

The paper reported that some labels want to be paid up to 58 percent of revenue, however, which is what Apple pays for Apple Music subscribers.

There are also deals being discussed whereby Spotify might pay a smaller proportion to labels if their music is only available to paying customers.

Spotify raised $1 billion in convertible debt in March. This deal allows the debt to be turned into shares when Spotify launches its IPO.

In its most recent financial results in May, Spotify saw revenues reach£1.5bn, but the company still made a loss.

Spotify’s subscription fees for its premium services have remained flat since launch. It also offers a free service funded by advertising.

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It faces competition from other music streaming providers such as Apple Music. Amazon is also gearing up to launch a new streaming service.

Spotify’s deals with publishers such as Warner Music Group and Sony Music Entertainment have expired in 2016. According to Music Business Worldwide, it has been out of contract with Universal Music Group for more than a year.

Currently it is using short-term extensions of these deals to offer music.

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