Spotify's contracts with all three major labels - Universal Music Group, Warner Music Group and Sony Music Entertainment — have expired and the company is now in negotiations to sign new deals in hopes of paying out less revenue.
According to a report by Music Business Worldwide, the Swedish streaming giant pays around 55% of its revenue out to labels (excluding publishing royalties), but as its long-term deals have now run out and the company is operating on rolling month-by-month contracts, Spotify is apparently aiming to cut its losses (which totalled around $194 million from a revenue of $2 billion in 2015) by reducing this amount, possibly to below 50%, although this amount has been denied by a senior source within Spotify.
Naturally, the idea of Spotify wanting to pay artists and labels less money is going to cause some controversy — particularly given the company's rocky reputation for not paying enough already.
Add to this the fact that Apple Music is known to pay 58% of its revenue out to labels and the now defunct Rdio paid 60%, and it's clear to see why the majors aren't too keen for Spotify to reduce their royalty payments.
As MBW reports, however, the negotiations are ongoing with both sides remaining optimistic that a deal can be reached, most likely resulting in long-term plans similar to the ones held over the past few years, but perhaps with more options for windowing (making certain releases exclusive to premium customers for set amounts of time), such as how Apple Music and Tidal operate.
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