Music Giant Sony Questions the Value of ‘Freemium’ Music Streaming

Could mean artists like Pitbull will exit such services as well

Soon everyone may have to pay to stream music.

In the wake of Taylor Swift’s recent decision to yank all of her songs from Spotify, Kevin Kelleher, the chief financial officer of Sony Music Entertainment, has cast doubt on the conventional wisdom of “freemium” services as an online business model.

"The key question is, are the free, ad-supported services taking away from how quickly and to what extent we can grow those paid services?" asked Kelleher on an investor conference call, according to The Wall Street Journal.

Sony owns some big labels including Columbia Records, Epic Records and RCA Records. Potentially, this means that big-time artists from T.I., Sia and Pitbull could disappear from your favorite ad-supported music streaming services.  

Although Spotify is the world’s music-streaming giant, accounting for up to 7 percent of global music sales, the music industry is now more focused on the money being left at the free-listening table. Of Spotify’s 50 million active users, only 12.5 million are paying subscribers.

And while on-demand audio and video music streams were up by 42 percent last year according to Nielsen SoundScan’s 2014 midyear report, actual album and track sales were down across the board, with the exception of vinyl LPs.

Other digital music providers have already scuttled their free services—or launched new subscription-based versions. Last month, Microsoft announced it would no longer offer the free version of Xbox Music as of Dec. 1, forcing users to upgrade to the $10 per month Xbox Music Pass if they want to keep listening. YouTube Music Key is also set to launch an ad-free streaming service soon with a similar price point.

Sony is in a position to set trends of its own in the industry. It had about 22 percent of the digital music market in 2013—along with its own streaming service, called Music Unlimited.