Spotify enters new negotiations with labels, wants to move free model to smartphone

Spotify is in talks with the major record labels in hopes of both lowering the fees it pays them and getting permission to move the free version of its service to mobile.

According to The Verge, the UK arm of the music streaming service has already started negotiations with Warner Music, and will have similar discussions with Sony and Universal over the coming weeks.

Insiders have told the website that Spotify is struggling to make significant profits on its current deals. It is said that 70 per cent of revenues go towards paying licence fees, and 20 per cent to customer acquisition, leaving only 10 per cent for the company to spend on other costs, including software development.

Spotify now has more than five million paying subscribers and another 15 million plus users worldwide. Its ad-supported free service allows for access to the entire music library via desktop or laptop computer. However, adding smartphone and tablet support will give it a far greater reach. At present, only a Premium subscription - at £9.99 a month - offers mobile support.

The paid subscription will no doubt offer more, such as the ability to download and listen to tracks offline, but with 4G data services soon to be offered by all major networks, Spotify clearly believes that free music streaming would be hugely popular to those one the move.

The music labels may disagree.