Spotify’s Free Access Model Closing In 3… 2… 1…

streamingmusic2014

Related articles:

(1) March 12, 2015: Sony Music CEO: “Free Music Is Causing the Death of the Music Industry”

(2) March 8, 2015: Universal Music Group CEO: “The Music Industry Needs to Shift Away from Free, Ad-Supported Music”

25 Responses

  1. Erik P

    Ad-supported has never been profitable…I don’t know why they keep trying.

    Reply
    • Adam

      SHHHH…. We don’t produce anything other than advertising here in the US, we wouldn’t want them to hear you….

      Reply
    • Sarah

      Because it’s good for the digital services, who get the fastest consumer growth by going with free.

      It’s also understandably appealing for artists – the idea that you can earn a nice income from your work without ever actually having to ask your customers to pay for it is tantalizing. Most people in business don’t like asking for money from their customers (I’m like this too – I was terrible at it when I had a solo law practice, I would’ve been thrilled to offer free, ad-supported legal services 🙂 ), because it can be uncomfortable. It’s going to be much harder when your work is something so personal and meaningful to you.

      The ad-supported free model means you don’t have to worry about that unpleasant “getting your customers to actually pay” part – or it would, if only it worked.

      Reply
  2. Anonymous

    So… YouTube says it pays 55% to right holders. And its net revenue is about $1.5 billion per year.

    But it actually pays (considerably) less than $295 million to right holders?

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      Interesting question on YT. Actually, I believe their most recent, 2014 top-line revenue figure was $4 billion, and Google’s Vice President and Global Head of Business Robert Kyncl recently reiterated that music is a majority of those plays.

      Just throwing that out there.

      Reply
  3. R_F

    Spotify wants to hook users with free and convert them to paid. they have said this repeatedly and often. they are not going to get rid of their free tier as it is central to their entire market strategy.

    Reply
    • small labe1

      …except Spotify’s free-tier is essentially the same thing as the paid tier… there is zero incentive and a very shitty busniss model. Spotify is a Wall Street financial instrument, not a music store…

      Reply
      • Paul Resnikoff
        Paul Resnikoff

        Correct, though Spotify – to their credit – argues accurately that a bigger paywall would just drive people to YouTube (already the largest platform for music in the world). They’re correct, and any effort to close Spotify’s freemium access tier is the same as giving Google/YT and giant gift. Strangely, I think the major recording industry powers-that-be might be that short-sighted; they are in panic-mode it appears.

        Reply
      • Nick

        The incentive to subscribe to Spotify is free, on-demand access on smartphones.

        Reply
  4. Anonymous

    Don’t believe the hype. The problem isn’t Spotify Free Tier. YouTube is the much bigger problem.

    a) Spotify has at least used its Free Tier to convert millions to paid. Do they need to continue to push and even improve their conversion rates? Absolutely! YouTube, on the other hand, is nowhere on this yet and the long hyped MusicKey hasn’t made a blip and it remains to be seen how sincere they are about being a good partner to creators. Let’s focus on keeping the heat on them.

    and…

    b) Spotify Free Tier is not on-demand on Mobile which is where most of their activity comes from. If you go to Spotify on your phone and are not a paid subscriber you get little more than a shuffle radio service. Truly on-demand free access to Spotify is limited to desktop/laptop access.

    Stay focused people. Spotify is not without its warts but they’re a committed partner who is converting many people to a paid model that is great for fans and creators alike. The important play here is to push YouTube to be as committed.

    b)

    Reply
    • Bandit

      How do you “push” YouTube?

      Carrot or Stick?

      Carrot: Google doesn’t need the money so ask pretty pretty please?

      Stick: Send a hundred million more takedown notices, threaten them with lawsuits or legislative change? I’m sure they will all get a big laugh out of that

      Reply
      • Anonymous

        You’re right about that, Bandit, but I know (firsthand) that these companies HATE the negative public attention. It comes up in every meeting. They whine that it’s unfair, that if we all could just understand their big vision that the world would be a wonderful place, etc. Their staffers get demoralized. They’re forced to face the fact that all of those Google employee perks have effectively bribed them to sell out the artists that they profess to love and sometimes – SOMETIMES – they are compelled to challenge their Google overlords.

        Reply
    • Paul Resnikoff
      Paul Resnikoff

      You want the truth…?

      Ad-supported ‘supports’ very little, except for:

      (1) the supposed flow from free to paid, which Spotify feels is working (up for serious debate)

      (2) music fans

      (3) Broadband access providers (home/office and mobile), who benefit from increased demand for content-rich data pipes.

      (4) Spotify and Spotify investors, who are aiming to parlay mindshare (acquired through costly freemium models) into a major liquidation event, i.e., and IPO or sale to a massive buyer (post-Apple/Beats, that is becoming increasingly unlikely)

      (4)(a) Major label groups, who have negotiated large equity percentages in Spotify, in the hopes of making a very large exit (see UMG/Vivendi’s $400MM+ earnout on the sale of Beats)

      Ironically, this same group of major labels is turning bi-polar, finally realizing that this equity-based licensing method is actually destroying their very business.

      If you can’t see those facts, then yes, go back to that press release. It’ll make you feel better.

      – paul

      Reply
  5. Hippydog

    I have to think the primary reason spotify has low advertising dollars is they don’t have much of an advertising infrastructure that others have.. ie a terrestrial station can do targeted ads with verifiable results.. Google is the world’s primary advertising king.. what does spotify have to offer?

    Reply
    • Sarah

      YouTube has pretty low ad-dollars too. So does Facebook. Even if you improve Spotify’s ad infrastructure, the prices won’t increase much.

      There is too much supply – an ever increasing amount of things to stick ads on. Every time a new app starts advertising, or an existing service increases the number of ad it displays, or every day that hundreds of new monetized videos get added to YouTube, the supply goes up. Demand stays relatively constant. The advertising industry, globally across all mediums, is only so big, and most of the spend goes to ads on tv, magazines, and radio. Increasing supply, relatively constant demand = lower prices.

      So yeah, Spotify could probably get better. But not much better, and it probably wouldn’t be enough.

      Reply
    • Anonymous

      Spotify actually has more than you would think. Because they deliver ads through their client, adblock more or less doesn’t apply. The effect of adblock on other services like Youtube and Pandora is tremendous. And because they use a client they also have access to more information than some of their competitors.

      I think part of their problem is that they are simply not very good at advertising. Their banners are poorly placed and handled rather poorly. They have a very small inventory of audio ads and many of their ads are music ads directed toward people who don’t even like that sort of music. Not only is that not very effective but it also pisses people off.

      Reply
  6. Name2

    On the upside, there isn’t a gun pointed at us at the head of this article.

    Reply
  7. Andrew

    Is Spotify just using the Freemium model for as long as it can, just to get every music fan in the world to mature their music library? They have the power to just say, BAM! Free tier is gone, and we’ve held your entire library hostage. Oh damn, looks like if you want to save yourself the time of re-establishing your entire library that took you years to build, looks like you’ll have to pay $10/month.

    Reply

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