Our sources say Spotify has been deeply reluctant to do this. They know that the free product is driving users towards the premium one. Once you have built your playlists and shared via Facebook, Spotify takes on a life of its own. But after three years and a million paying customers it's not doing it fast enough for the record labels' liking.
So Spotify needs its free service like humans need oxygen.
And yet, they've just been forced to effectively kill their free offering.
If Spotify couldn't work with the record labels, neither can anyone else. My conclusion: the recording industry deserves to become as commercially and culturally irrelevant as it is morally bankrupt, and it is going that way fast. Don't help them save themselves. Start your startup in another industry.