Today we expect we will finally see the announcement of whether Spotify will launch a video streaming service or not.  Over the past few weeks rumours have been flying around music, entertainment and tech worlds regarding Spotify’s plans to launch “Spotify Now”, its new on-demand video service, if a recent CNBC report turns out to be true. This launch will pitch itself weeks ahead of the launch of Beats Music by Apple Inc. at the Worldwide Developers Conference, in attempt to solidify its place in the market.

So, if ‘Spotify Now’ does go ahead what will it provide in the way of a service? The new service is said to include an on-demand video service, customisable playlists and a more interactive user interface compared to the current Spotify Platform. There have been talks of Spotify seeking partnerships with video content providers, such as You Tube affiliates to acquire their content and other media companies in a move to co-create original video series – along similar lines to how Netflix have developed their on-demand video offer.

However there is still one burning issue that may play an important role in how the new service develops and that is the fact that Spotify is yet to turn over a profit, despite its claims of 60 million users of which 25% are paying subscribers.  That may change with this new service alongside Spotify’s partnership earlier this year with Sony PlayStation who dropped its own branded Music Unlimited app in favour of Spotify being its official content provider.

Agreements with Universal and Sony, regarding licensing to use their catalogue has also put financial pressures on Spotify. A recent article in The Verge exposed the way that streaming rates are calculated after they got hold of a copy of the contract between Sony Music Entertainment and Spotify giving the streaming service a license to utilize Sony Music’s catalogue.  The contract that was signed in 2011, a few months before Spotify launched in the US, exposes how much Spotify must pay in yearly advances to Sony, the subscriber goals that Spotify must hit, and how streaming rates are calculated. It is claimed that Spotify paid Sony up to $42.5 million dollars in advances to use their catalogue, one can only assume that Universal would be getting the same if not more, considering that Universal Music Group dominate approximately 40 per cent of the global music market. Similarly, Sony and Universal have been putting pressure on Spotify claiming that they (Spotify) are not doing enough to get more of their 60 million users to move across from the free to the paid for service.

Tough times ahead for Spotify perhaps? Or maybe this rumoured venture into video streaming service with unique on-demand content might start seeing Spotify turn a profit at last. Lets see what today’s announcement brings.

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Matt Grimes

Degree Leader for Music Industries at Birmingham City University