Spotify is probably the online music service which is generating the most headlines at present. In the last couple of weeks alone we have had analysts ‘guestimate‘ it’s potential turnover and costs, trying to paint a rosy picture. We have also had top record industry execs claiming the business will not exist in a years time and additionally, we have had Spotify themselves claiming that the business approach from labels is not helping them to survive which will ultimately only hurt the industry as a whole.

Why so? Well the labels need there to be legitimate companies selling and distributing their content. Without them, we the consumer, will have no choice BUT to go to illegal filesharing sites. However the labels also want to get a decent return on their property, otherwise whats the point - right? The problem is many of these online businesses, Spotify included, are still experimenting with what business models, or selection of models (in the case of spotify) will work and be sustainable.

Spotify is offering everything from subscriptions, to free content but with adverts, to downloads claiming they want to appeal to all types of consumers. Its clear though that they are also not too sure which, if any will work. So whilst I quite like the idea that there is a choice element in Spotify’s charging menu, it’s also clear that they don’t really know which options will stick.

In recent years some labels have been making investments and buying stakes in these sites, and clearly thats the way forward. After all, if I was Spotify and I DID have an audience of 6 million it would be substantially cheaper to create and commission my own music and market directly at the 6 million strong audience. Accordingly, if I was a label and wanted an audience of 6 million listeners I would buy Spotify and use it in the same way that labels used to use their own record stores many, many years ago. Perhaps the types of deals and contracts offered to artists, producers and all those involved in making the content need to ‘wind back’ to the 60s where people were salaried, perhaps with a milestone clause to protect the creatives - i.e. if the music generates over ‘x’ amount of revenue then the contract kicks into a bonus structure, more akin to a current deal structure. What do you think?

Spotify is now looking at launching their own branded music phones, which will bring them in direct competition with Nokia ‘Comes with Music’ and Sony Erricson’s offering - along of course with the Iphone. Is this a wise move? Certainly having an Iphone app makes sense, but would you buy a phone especially to gain access to the Spotify network? Im not so sure.