Spotify has plans to launch a free, ad-supported version of its streaming music service on mobile devices, according to people familiar with the matter. The Sweden-based company has reached licensing deals with three of the global music companies to use their recordings on the service. The ad-supported offering will allow nonpaying mobile users to play a limited number of songs on demand, but will mostly serve up music based on user input, similar to services such as Pandora.

According to The Wall Street Journal, negotiations lasted more than a year with Sony Music Entertainment, Universal Music Group and Warner Music Group — over the rates it will pay them to play songs on the free mobile service, and over how much direct control users have over the content.

Spotify launched its own custom radio feature for free users and paying subscribers last year. Spotify’s premium service, which costs $10 a month, delivers unlimited, on-demand music from its 20 million-song catalog on any device. Until now, Spotify’s free users have been able to play music on demand, with ads, on their computers — but they can’t use the service from their mobile phones or tablets, unless they enter their credit card information to sign up for the 30-day premium service trial.

The major labels, which own a stake in Spotify, are eager to increase the company’s subscriber base and the percentage of free users who convert to the paid version, currently about 20 percent. But these deals could also supply the labels with significant ad revenue.

According to TechCrunch, Spotify’s advertising infrastructure has matured over the year. It may be able to more efficiently sell its audio ads, making them a more viable way of earning money or at least breaking even from ad-supported listeners. That means it may be more cost-effective to support free mobile users now than before.

Over the last year, a number of tech companies including Google and Apple unveiled plans to launch their own streaming music services. Spotify still faces a lot of competition from startups like Rdio, Slacker and Deezer. With Beats and YouTube slated to launch their services next year, Spotify cannot risk going into the new year without a free mobile option.