Since its founding in 2006, Spotify’s business model has been simple. It takes music owned by musicians and record labels and lets people listen to it for free interspersed with ads or without interruptions for a monthly fee. It passes along most of these revenues to the owners of the music, keeping a cut for themselves.
As Netflix and other content platforms have learned, this middle-man model is not particularly lucrative or sustainable. In Spotify’s case, the record labels have a lot of leverage because if they choose to block their content from the platform, Spotify would basically die. As a result, labels are able to extract about 75% of Spotify’s revenue.
Source: The economics of why Spotify wants to be like Netflix — Quartz