Sources: Spotify Has 600,000 US Subscribers; Frustratingly Low Conversion Rates…

Rhapsody has a million subscribers in the US, but it took ten years and a major acquisition to get there.  So what’s wrong with 600,000 US-based subscribers after nine months for Spotify, as reported by sources to the New York Post?

“Since last June, Spotify has signed up 3 million US subscribers. About 20 percent — or 600,000 — pay for the service.”

― The Post’s Claire Atkinson, based on source information.

One problem is that there’s $200 million-plus already sunk into this (and probably more ahead), plus a Facebook integration that melts the face of nearly every competitor.  Which means there’s intense pressure from investors to ramp up – right now, and very quickly.

“The question is, how sticky is Spotify? Is it able to hold on to users for more than a year?” one source said.  “The free people are not signing up for a long period of time, or at the highest pricing tier, or they’re not renewing.”

But wait, there’s more. Because this conversion figure of 20 percent may be drastically high.  Just recently, Eliot van Buskirk of Evolver.fm found 17.5 million Spotify app users on Facebook alone, a figure that is completely different than the 10 million active userbase figure offered by Spotify.

And keep in mind, those are just the ones that are linking their Facebook accounts. “Why would Spotify want to seem like it has fewer users than it might actually have?  Don’t all companies want to seem like they have as many users as possible?” Buskirk poses.  “A source who works for a competing service suggested that Spotify might want to appear as if it is converting a higher percentage of free users to the paid version.”

Separately, in conversations with Digital Music News, Spotify has been frustratingly opaque on its total userbase number – active or otherwise.  Other estimates and figures have blown past 10 million, yet Spotify refuses to up that figure.  And, just as suspiciously, has refused to disclose any US-based subscriber or user numbers.

Would you invest another $100+ million on that?

29 Responses

  1. Avatar
    Maxwellian

    Spotify is an #EPICF–KINGFAIL everyone!

    Investors run for the hills!

    Major labels charge as much as you can before this baby implodes!.

    Spotify try to sell the Facebook or I.P.O. right now!

    Artists: You are NOT getting any money out of this one!

    words of wisdom from ::MW

  2. Avatar
    HansH

    3 million US users? That is little over 1% of all US inhabitants with internet access. Compare that to the 37% in Sweden!

    Doesn’t this explain the continuation of the unlimited streaming for US users?

    • Avatar
      Vail, CO

      Right. $200MM to get to 3MM. How much to get to 30MM?

      Hmmm…

  3. Avatar
    steveh

    In all honesty, if this is true, I have to agree with @Maxwellian:-

    EPIC FUCKING FAIL!!!!!!!!

    And don’t say we didn’t warn about this!

    With numerous others, I have been posting since early 2009 (when it started to be hyped in the UK) that the Spotify numbers do not – cannot – add up.

    The Spotify prospectus is bogus!

  4. Avatar
    true that

    Every couple of years Spotify has to pony up whatever cash they have to payout whichever major lable’s license agreement is up for renewal.

    Right now that cash is coming from Venture Capital. But the major labels know that the VC sugar-daddy is getting tired of writing bigger and bigger checks. So everyone, from the VC’s, to the Labels, to Spotify management, are hoping and praying that they can get just one more shot of cash to buy just enough time to get just enough subs and customers to be able to tell one more tall tale…. to go public.

    Then the layman investor gets an ‘opportunity’ to own a piece of Spotify at an inflated price, which will finance the next major label ‘hold up’, and the VCs and management get to cash in and leave the layman holding the bag on the business model that simply doesn’t work.

  5. Avatar
    Joda

    I wonder why the press keeps giving this company so much coverage.

    This is a PR created company. It’s not scalable. It’s not a “shot in the arm for the music industry. It’s barely even good for musicians. Plus it doesn’t and won’t have enough subscribers to make a dent in the US marketplace unless it gets bundled in a MAJOR service the way they did in their home country.

    On top of that the heralded Facebook integration they have isn’t unique to them. Everyone has the same tools available to do it via their api. Hell, you could do it Paul. But their top notch PR team has spun it into something that was unique. Good job for them, but why did the blogosphere fall for the okey doke?

    This company is all smoke and mirrors.

    Stop giving them so much press at the expense of all the other services. Rhapsody has more subscribers at a much higher pricepoint yet we hear NOTHING about them. Why is that?

    • Avatar
      Visitor

      Agreed, I also find it comic that they have “apps.” They might as well call them playlists. that’s all they are, but now they can tell people who don’t know any better, that they have “Apps” on spotify. Do yourself a favor and look through the apps on there, there are about 20 in total. Most of them have less than 1000 people subscribed.

      Also they’re not getting ad revenue in the way they want to, they can’t be when 60% of the “ads” i hear while listening are spotify in house. where’s the money sposta come from?

    • Avatar
      Deckarudo

      No, it’s not that easy to do the same as Spotify on Facebook. It’s not a simple use of their API.

  6. Avatar
    Visitor

    Yeah, f*** Spotify, let’s all go back to illegal downloading since everyone wants their music for free. Idiots! If you got rid of all the subscription services, the music industry would be in A LOT more trouble then it already is. A penny earned is better than absolutely nothing! If the music industry didn’t have their heads up their butts, they would have found a solution to their problem by now. But, no………. let’s all just blame Spotify!!!!!

    • Avatar
      steveh

      I don’t buy your bullshit “one penny is better than nothing” argument.

      The plain fact is that Spotify is NOT a “solution”. Indeed with it’s woeful lack of transparency it is part of the problem.

      Spotify has massively and attrociously overhyped itself, and if it does crash in flames it will richly deserve its fate.

      In the UK Spotify first hyped itself as the “iTunes killer”. As the wise men say:- live by the sword die by the sword…

    • Avatar
      HansH

      Visitor, you are absolutely right. The fact that Spotify isn’t catching on in the US as expected is not gonna help the industry back to the good old days. On the contrary.

      It just may take more time because the US is about the only place with other streaming services being around for years. In most countries in Europe Spotify had the advantage of being the first.

      But the world is bigger than the US.

      Have you read the story about the Swedish Indie artist Jonathan Johansson who earned $20,000 from streams in the first month after the release of his album? Here is the link

      At Least One Indie Artist Is Making Big $’s From Streaming Music
      Now how about that!

  7. Avatar
    QSDC

    I don’t know how realistic it is for a small company to be able to develop a profitable business model based soley on music.

    Apple was able to succeed with iTunes because they didn’t care if they made money from the music, they were in the iPod business.

    I think Spotify will have to be acquired by a larger company that will use the streaming music as a lure to sell something else. Eventually, I see the telcos and cable companies running music streaming services as an “added value” rather than the main event.

  8. Avatar
    musicservices4less

    Does anyone think that Spotify’s business problems and other music web services that are having similar problems have anything to do with the vast monetary devaluation of music resulting from illegal file sharing/piracy over the last decade? So far iTunes is the only one that appears to be a going concern. Does anyone know why that is? Could it be the walled garden?

    • Avatar
      steveh

      re:- “the vast monetary devaluation of music resulting from illegal file sharing/piracy over the last decade”

      By hyping up a service that falsely pretends to pay artists decently – when in fact they are offering “all you can eat” music content at a viciously devalued price – Spotify are contributing to their own demise.

      Traditionally one would say “hoisted by one’s own petard”.

  9. Avatar
    streamin' eyeZ

    I recall a few years back listening to Spotify head honcho in Hong Kong saying how Spot in Spotify was all about spotting trends. Acquiring users, measuring their behaviour and selling that data on for squillions – the music’s just a catalyst.

    Google’s doing the same with music, maps and your browsing habits right now!

    So… the money’s in what consumers do with your content and not the content itself.

    So what’s the solution?

    Easy… cut out the catalytic middle man as follows!

    The IFPI creates an industry wide Data Resource Monitoring capability that supports all participating labels.

    The labels then sell their content for FREE and attract squillions of users in the process. The Data Resource Monitoring network monitors all resulting free music use and user behaviour and the industry sells this data back to whoever will pay for it – including Google and Spotify. It’s just like a Collecting Society but for data!
    The industry could call the Digital Resource Monitoring process something catchy like DRM.

  10. Avatar
    The Sage

    No royalties, no revenue= No Spotify

    Great idea, poor execution.

    Horrible artist and label relations.

    Bad press regarding the same.

    Paltry conversion rate to sub model.

    Free is free and will always be free.

    Consumers just don’t care about Spotify.

    Artists cant make a dime off Spotify either.

    This is a money pit of the highest order.

    Turn out the lights, the party’s over.

    Welcome to the .com graveyard.

  11. Avatar
    @ONErpm

    This confirms our cynicism in regards to Spotify’s extended free U.S. service.

  12. Avatar
    WILL

    We’ve been hearing the same old shit going 5 years now. Starting with the first bunch – Spiralfrog, Qtrax etc. They couldn’t figure it out with the labels and in 2012 apart from Deezer who have kept well away from the US, all these services are screwed. Only a few months ago MOG was the big Spotify competitor but in a matter of weeks it then was up for sale. Itunes and Amazon and other download platforms will continue and prosper. These services are easy to forecast with regard to revenues. And that’s what this business needs.

    Other interesting models like Guerva and FreeAll Music where the listener chooses a sponsor brand to pay for the download are also progressing quietly.

    These VC’s are a bunch of dicks for the most part. They’re the tech equivalent of clueless A&R men and just chase ‘what’s trending’ for say two weeks. Look at Highlight, Glancee and a sleuth of other stupid geo-localised apps on show at SXSW.

    “Just scale and get millions of users, then we’ll worry about how to make money”. Fuckwits!

    • Avatar
      VC's

      The one you are misisng is Rdio who has no VC backing and is owned by billionaires and seem to be expanding as fast as Spotify has.

  13. Avatar
    Charly Prevost

    Does this not prove once again that subscription, at best, is a niche market.

    • Avatar
      paul

      But are we pouncing on this model too early? After all, part of Rhapsody’s recent surge is rooted in mobile, and we’ve never really seen numbers quite like these…

      (…or, financing levels quite like these).

      But I’m taking a wait-and-see.

      /paul

  14. Avatar
    Visitor

    As a user I love spotify but damn. Rhapsody just say the word and I’m back in your arms.