Spotify Now Music Industry's Number Two Revenue Stream

James Johnson

Music streaming service Spotify is now the number two revenue source for major music labels. Sources close to the company on Tuesday told Business Insider that the streaming music platform leaped passed its competition and is only now led by Apple's iTunes service. Those same insiders believe Spotify could soon surpass Apple as the music industry's main provider of revenue.

Spotify may be gaining momentum but it still has a long way to go before catching Apple which paid out $3.2 billion to record labels in 2011. Spotify in the meantime has 23 million registered users in both free and ad-support models.

Among the streaming services biggest supporters is Napster cofounder Sean Parker, one of the company's earliest investors and most vocal cheerleaders.

The constant Spotify growth is important for music labels because it could finally given them some leverage when it comes to negotiating terms with Apple and the revenue Apple takes for each music download. Music labels have tried for years to convince Apple that an iTunes subscription service should be offered, an offering Apple has ignored.

Spotify has recently expanded its offerings with personalized radio players that many critics are already calling better than Pandora's service.

Spotify chief executive Daniel Ek predicts that Spotify's revenue could reach $889 million for 2012.

Rumors have circulated in recent weeks that Spotify is suffering from disappointing adoption rates, however the company recently announced its iPad app and then added radio features to its existing service. Spotify on Tuesday also announced a new Yahoo partnership that will see its technology integrated throughout the Yahoo Media Network which has a reach of nearly 50% of the worldwide internet audience.