Now the record companies are telling Spotify how to run its business

The major record labels are taking advantage of license negotiations to pressure Spotify to limit the amount of free music it offers. Their aim is to force users to take up a paid subscription by reducing the quality of the free service, which Spotify has shown itself better able to manage than anybody. The company, which has one of the highest free-to-premium rates on the whole internet, is now facing an oligopoly of three record companies whose greed could suffocate its business model.

The situation is a striking paradox: record labels, which have traditionally been among the worst of the worst in adapting its activities to the web, are now telling Spotify, one of the most brilliant companies understanding the web, how to run its business.

Creating a valid business model in the face of myriad free options is no small challenge. The fact that the company has been able to create a service that huge numbers of people are prepared to give a go, a respectable number of whom are prepared to pay for, shows an understanding of human psychology, and is largely based on experience.

Spotify knows it has to offer a decent free service, one that provides access to an unlimited catalogue. Users may be prepared to accept a bothersome advertisement every few songs, thus coming to the…