Spotify has recently posted a blog article revealing its increased subscriber and active user numbers, giving Cupertino a hint of what it’s up against if it wants to thrive in the streaming music business. The company also released a YouTube video touting the advantages of its “freemium” business model, making it clear that Spotify is opposed to the “all paid” structure that Apple Music will use. See the video below, or click here if it fails to load.
Through Spotify’s free to premium model, the service has managed to double its subscription numbers in a year, going from 10 million paying subscribers to 20 million. The company has also increased its active users by almost double, scoring 75 million total listeners over last year’s 40 million.
Spotify likens its success to days past when radio listeners would go to record stores to buy their favorite albums on vinyl, cassette, or CD. Almost 80 percent of the company’s paid subscribers start off as free users, akin to people listening to the radio in their homes or cars. Spotify’s free service limits what users can do, giving them a customized Internet radio service with no ability to choose particular songs to listen to or download tracks. The premium service is more like going to the record store, since listeners can pick and choose their artists and songs, and download music to enjoy offline.
This blog post and video make it clear that Spotify isn’t going to just roll over and play dead in response to Apple Music. The company is stressing why its business model works, along with why it’s good for artists. Spotify claims that “all paid” plans don’t gain subscribers, so artists don’t earn royalties. Through Spotify’s “freemium” model, the company has paid out more than $3 billion in royalties, including more than $300 million in the first quarter of 2015.
I am anxious to see just how well Apple Music fares without a free tier. Granted, Cupertino is including a lengthy three month trial period in its service, but will this be enough to draw in monthly subscribers? Apple is planning to market to users through popup invitations from iTunes purchases, but many readers have pointed out that they don’t even purchase music from Cupertino’s library anymore, so will that help?