Updates to this story
Apple doesn't want Spotify to launch in the US.
The company has told major record label execs that if they allow the music streaming service to launch in America they will jeopardise further growth of the digital music market.
Spotify hasn't had much luck so far in the US, failing to secure licences from Universal, Warner, Sony and EMI.
According to CNET this is because Apple has stuck its oar in. It has raised doubts over whether the music subscription services can ever generate significant revenue. It has also said the easy availability of ad-supported free music would eat into music downloads sales, not just at iTunes but also for Amazon.
Apple is not alone in questioning whether it can be a viable business in the long-term.
A source told CNET: "Some of the labels are unconvinced of Spotify's business model and its ability to get people to pay for music; Apple executives have expressed concern to the labels that a free music service here could undercut already lackluster download sales; at least one label chief, Edgar Bronfman Jr., chairman and CEO of Warner Music Group, has lost confidence in ad-supported models."
Spotify has been a huge success over here in the UK but Apple may have a point. While being a completely legal service music acts tend not to like it because they get so majorly screwed over on profits - the little revenues which are made go first to the labels and then, if they're lucky, trickle down to the artists.
We recently spoke to Paul Manchester of independent vinyl label Dirty Water Records to see what it had to say about downloads, digital and Spotify over here in the UK.
"From an aesthetic and aural perspective, Dirty Water is only interested in vinyl. It looks better, sounds better, and even is more durable than a CD. The reality is many people have been buying CDs for years, and will continue to do so, so we release in CD format too except for singles."
He said the same logic applies to downloads: "As we’ve explained to our bands – many of whom share the same opinion expressed above – there are many people, particularly young, that don’t buy physical music formats so unless we are prepared to write them off as customers we need to fill that demand. While downloads generate less revenue per unit than physical formats, there are no costs for production, storage, damage, shipping, etc., it never goes out of print, and can reach customers anywhere in the world instantly."
However, he said when it came to streaming it's a different story: "At this point we are still supportive of Spotify, Napster and other streaming services, although that is more from a fact-finding perspective than a belief in the economics of it.
"The compensation is derisory, there is little evidence to prove that streams are encouraging download purchases….and it seems to us that the ability to log on to, say, Spotify and choose a playlist of Dirty Water Records releases effectively for free is a strong disincentive to actually purchase either the digital or physical formats.
"However, the jury is still out and there are advantages in getting our releases heard which may result in additional sales and increased gig attendance"
In the meantime, take a look at this fantastic infographic from Information is Beautiful. It details how many plays, sales or downloads an artist, not a label, would need to get paid minimum wage in the US. For a self pressed CD selling at $9.99, they would on average need 143 sales. 1,229 would be needed from a service like iTunes or Napster.
Rhapsody would need 849,917 plays in a month. Last.FM would need 1,546,667 plays, and Spotify would need a staggering 4,549,020 plays in a month's time.