The answer lies in the power imbalance between Spotify and its music suppliers, namely the major record labels that control most of the music streamed on Spotify.
Spotify licenses most of the music it streams from three companies: Universal Music Group, Sony Music Entertainment, and Warner Music Group, also known as The Big Three.
Together, The Big Three hold a 70% share of the music recording industry and a 60% share of the music publishing industry, forming a sort of unholy monopoly over the music industry.
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The difference between having or not having The Big Three’s music catalog is a life-or-death situation for Spotify.
This gives The Big Three a lot of leverage over Spotify and forces it to pay them nearly 70 cents of every dollar it makes, leaving little room for profits.
From the article:
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