Spotify is preparing for their initial public offering that will be next year but have one obstacle to overcome first, getting the rights to play the music on their site for years from now.
The streaming website is currently operating on shorter term extensions of its old contracts with record label companies and would need new and longer deals to make itself more attractive to investors. Spotify has seen its net loss get up to $200 million last year even though revenue doubles. They want to decrease the amount they have to pay to record label and artists to use their music which is currently 55% of their revenue. They then pay 15% to music publishers and songwriters so right there 70% of their revenue is taken before they can do anything with it. The company is working back an forth with record labels to find a middle ground that can allow the company to profit.
Part of the discussions is changing how many free subscribers they have and how much on the website those free subscribers can do, in hopes to promote more people to become paying subscribers. They are also considering raising its $10 subscription price which has been the same since 2011, but do not want to be the first big music streaming company to raise prices and drive customers elsewhere.