Good Idea? Spotify Abolishes Limits on Free Listening In the US

The freebie party shall go on!

But, who’s paying this bar tab, exactly?  On Thursday, Spotify opted to extend unlimited free listening in the US – indefinitely.  “We’ve been so overwhelmed by the US response to Spotify that we’ve extended the honeymoon for unlimited free listening,” the company blogged. “Right now, if you’re a free user, you can continue to enjoy millions and millions of tracks without time limits, gimmicks or catches.”

Sounds like a pricey move, though Spotify may feel completely confident that premium conversion rates will remain aggressive.  The company has been somewhat cagey about its total active userbase, but quite clear on its global subscriber growth.  Which looks, impressively, like this (as of January).

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And make no mistake, this is a land grab.  Because Spotify wants America… all of it! In the US theatre, Spotify is quickly catching up to Rhapsody, whose freebie giveaways are far more limited.  But then again, so are its finances.  The move comes alongside leaks that Spotify is chasing another gargantuan funding round, potentially exceeding (another) $100 million.

All of which supports a business model that’s starting to look like a massive gamble.  “This is a healthy model,” Spotify chief content officer and US managing director Ken Parks told the Financial Times earlier this year. “As it scales it gets better for everybody.”

26 Responses

  1. R3dko

    I ended up going Premium, simply because there is no other way to enable listening to Spotify via a mobile device. Free listening is a great way to get people hooked, because their primary customer base typically utilizes a mobile device/phone for music. Easy hook, simple upsell = winning product.

  2. Voice of Reason

    Sounds like yet another way to fuck musicians out of money…

  3. Tone

    I’m confused – I live in the US but I hear commercials. What exactly is he talking about?

    Also, how much of their rapid growth is due to the Facebook deal? My guess is that most of the growth this year is a resut of the deal, does that mean things will slow down in the future?

    If Spotify really does hit mainstream, I just hope that payouts increase because $167 for 1,000,000 is horrendous (Gaga).

    • Visitor

      First off that Lady Gaga article has been corrected by those with more knowledge of Spotify payments a year ago, apparently the payment was for one form of the revenue stream not all revenue generated from those streams. Also my guess, although I do not know, US rates were set differently than the early European rates (the article you speak of predates Spotifys US release)

      Second, Spotify has no extra money to give artists. It’s not like they are making money hand over foot and keeping it all. Maybe you need to get consumers to pay more, but then you risk consumers going back to illegal forms of acquiring their music.

      As far as growth, I’m assuming Spotify seeing their growth happening exponentially. As more people integrate their listening with their facebook wall new users will give Spotify a shot, once the new user realize what it offers they will want to take it in their cars and will pony up the $10 a month.

      The industry is testing new waters and a lot of shit needs to get figured out.

  4. sinking

    Spotify has burned through almost $200M in cash so far. They have paid 66 bucks per user, some free, some paying. They probably generate $1.4M a month in revenue, tops, after they pay the labels and publishers in subscription fees. Let’s say they book the same amount of money in advertising a month and net 1.4M after sharing with the labels, publishers and their agency fees.

    They have 700 employees, offices everywhere, sponsoring Bonnaroo and all the PR, marketing and ad agencies they hire, probably each at 20K a month easy.

    It is quite possible they are bleeding $20M a month, easy.

    This is a trainwreck.

    Rdio has raised under $20M and are privately owned, no investors and no major label ownership

    MOG is about to be sold to HTC.

    Rhapsody, who knows, but they must have positive cash flow or couldn’t exisit with out MTV and Real Networks as parents anymore.

    Muve music is subsidized by their parent the mobile carrier.

    Deezer is owned by Orange Telecom.

    Each of these other companies have enough mindshare to be in the race for a while and Spotify has to go and rasie money at a 3.5B valuation or else the majors will want more money and more equity and their other investors will be looking for a way out.

    I’m not a Spotify hater, but they look like a Herman Cain flameout.

    • steveh

      I’m not a Spotify hater, but they look like a Herman Cain flameout.

      I am a Spotify hater – and your analysis is sweet music to my ears…

  5. Yves Villeneuve

    Spotify is extending the freebie because it can’t convert enough to the premium service. By extending the freebie, it also attempts to hide this large conversion disappointment from potential new investors.

    Most of the uptake in new subscriptions were a result of the Facebook launch. Subscriber growth will likely fall going forward, with or without Facebook.

    Extending the freebie indifinetly, yet another Spotify/Major Label marketing manoeuvre to entice investors into a solid fantasy (pipe dream). When is the pullout, guys?

  6. Preplexed

    Why doent the just buy Grooveshark?

    Then they will have 40+ million users.

    • Maxwellian

      The answer to that is very easy.

      Grooveshark has ruined their reputation in the music community to the point that no self respective artist, manager, label or company wants to do deals with them, also that goes for brands that get a clue like Mercedes Benz. They are suing Digital Music News, they are evil and Spotify would never touch this toxic company in a million years.

      Everyone in the music industry hates Grooveshark including the most powerful Irving Azoff, UMG, all major labels, everyone. They steal and are thieves.

      ::MW

      • Steve

        While Grooveshark’s reputation has been damaged by negative PR in recent months, this is simply not true. If you look on their site, Grooveshark is launching new artist and advertiser campaigns all the time— especially for the smaller unsigned acts whom Spotify could care less about.

        And how can you speak for everyone in the music industry- come on, that’s an absurd statement! Anyways, since when does one’s being powerful (like Azoff) make them a wise source for the entire industry to base their alignments on…executives and corporations with the most power (like you’ve mentioned) are lawfully required to operate and align with the end goal of maximizing shareholder dividends. How does this help or advantage “everyone”, especially the millions of hard-working artists not signed to any label?

        Comments that mislead and contain blatant logical fallacies hurt the credibility of this awesome blog, and by association, make us out to be ignorant! I know it probably felt good to get this out of your system but please refrain next time you get the emotion-driven urge to post comments like this. -S

        • Maxwellian

          Steve, seriously you are underestimating how virulently hated they are more than anything I’ve seen in a very long time. I’m talking to managers, artists and the labels every day and they F’ing hate Grooveshark with a passion (I do also now as well). Which is sad because they burned all their goodwill after getting bullied by UMG which by the way, has stepped on more than just their Apple and Google deals by the way. And they go ahead and step on DMN’s face and why exactly?

          :: MW

  7. Tgone

    I still don’t understand why Spotify doesn’t enable paid downloads in conjunction with streaming. Sure, people want to stream to but they also want to own. Why not offer both in one package? Is there any service that’s doing this, and if not, why not? I’m baffled.

    • David IndigoBoom

      Spotify Does have a paid download option for the songs. At least they do here in Europe. Look again. Right by each track there is a “GET” button.

        • download

          Yes, I’ve used Rhapsody for years, then switched to Spotify, but saw the Rdio redesign and their much deeper discovery and I’m sold.

          And I’ve bought downloads on all three services.

      • steveh

        yes Spotify has a download option in Europe – but nobody uses it – sales are negligable.

        You need to face the fact that the overwhelming majority of Spotify users see it as a direct replacement for “ownership” – hence all the worries about cannibalisation.

  8. effin

    It is my opinion that Spotify needs a compulsory licensing scheme to be the most fair for all rightsholders.

    Great article here about this:

  9. Paradox

    I just read the blog.

    Nowhere does it say “indefinitely”

  10. tricky

    without time limits, gimmicks or catches.”

    So they put off the gimmicks and catches? No thanks, I’ll stick with Rdio where I can listen without ads and will probably upgrade my account eventually.

  11. hank alrich

    “As it scales it gets better for everybody.”

    = “We lose a little bit on every transaction and make it up on volume.”

  12. RockGod

    Rdio can stick it as far as I’m concerned. They can’t even state what bit rate their music is and Spotify now has gapless playback. Spotify all the way for me!

    • gap

      Here’s an interesting thread about Rdio’s bitrate, one of the Rdio tech people actually comments on the bitrate.

  13. Yves Villeneuve

    Spotify monthly app users is currently 17.2 million, according to Facebook.

    Less 3 million paid users equals 14.2 million free users.

    I imagine some of those free users have only used the app once and then walked away for good.

    It wouldn’t surprise me if the Spotify app still had an undeletable spyware cookie.

  14. @PaperStreetRe

    Spotify continues to roll big with the finances to expand the user base. That’s good.

  15. Visitor

    The winner will be who ever gets in with the streaming home systems like dvd players and future car consoles. If Spotify makes their name the one people know they could win in the long run.

    IMO the future holds a lot of reasons for users to become paid users.