Spotify’s Latest ‘Subscribers’ Are Barely Paying, Analyst Notes…

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(Mark Mulligan, Music Industry Blog)

Extreme monthly discounting, not Taylor Swift, is what’s really boosting Spotify’s numbers, according to top music industry analyst Mark Mulligan.  Spotify is currently running four different, deeply-discounted specials, including a 99-cent-per-month trial initiated in early December.

The result is a horde of near-free ‘subscribers,’ many of whom won’t continue once full-price renewals come due.

Indeed, Mulligan sees the 99-cent giveaway as the biggest driver of all.  But what about the massive publicity blitz offered by Swift, arguably the largest and most influential artist in the world right now?  Spotify’s latest growth spurt coincides perfectly with Taylor’s high-profile pullout in early November (just look at this graph), though Mulligan sees only a ‘modest’ gain for Spotify from the endless amounts of free publicity.

“In fact, the wall-to-wall media coverage of the ‘Swiftify’ debacle actually boosted Spotify’s profile and may even have modestly helped the numbers,
” Mulligan surmised.

Perhaps the answer lies somewhere in-between: Swift likely drove hordes to Spotify’s front door, where Spotify converted users with extremely-discounted specials.  Indeed, Mulligan described the four specials at work, one price-choppier than the next.  “There are two short term and two long term drivers of Spotify’s December growth,” Mulligan outlined:

  • Long Term 1: Student plans – effective discount: 50%
  • Long Term 2: Family plans- effective discount: 50%
  • Short Term 3: Holiday gifting – effective discount: 100%
  • Short Term 4: Holiday 0.99 promotion – effective discount: 90%

 All of which raises the question: is anyone paying full-price for Spotify anymore?

37 Responses

  1. Name2


    Have it your way, DMN. If it turns out the public which won’t pay $10/mo for unlimited streaming but WILL pay 99 cents a month for it, who’s the loser?

    ObMaroon5: Wake Up Call.

    • Paul Resnikoff

      I’m not quite sure if those are the only options to be considered. But, I’m not in a position to judge this low-cost strategy until we can see the outcome — after all, we don’t know what percentage of 99-cents promotions will turn into actual, longer-term subscribers (at $9.99, $4.99, whatever).

      The conclusion we can make at this point, however, is that Spotify’s latest subscriber gains are not necessarily as robust as the top-level press release touts.

      • john

        any company is gonna take a maximalist stand with good looking numbers and try to obscure any funny business. regardless, i think the amt of people who will like the 10 a month experience will forget to cancel etc will be formidable enough that the promotion will have been worth it for them.

  2. GGG

    How does this person know many people won’t continue paying full price? There isn’t really precedent. Not that I necessarily think they will, it’s just a pretty speculative statement to enlarge and bold without any evidence/data. Or is there churn data for other deals?

  3. Anonymous

    i just heard a rumor through the grapevine…

    they are nearing a cure for cancer and apparently taylor swift was the one who made the break through discovery…

    shes also one of the astronauts tabbed for a mars mission, has invented a new technology and battery that allows electric cars to travel for thousands of kilometers a charge, and currently has an achievable plan to feed every starving child in the world, also, furthermore, she is a gazillion black belt jeet kun do special tactically trained super ninja and is going to personally rambo style take out every dictator and child molester and human trafficker in the world, WHILE composing her next album all in her head and then playing it with her feet while she writes a new twilight novel series with one hand and blesses a long line of visitors to the forehead jesus style with the other.

    oh great esteemed leader…


  4. Ari Herstand

    80% of Spotify paid subscribers started as free users. I’ll be curious to see how many the promotions turn. My guess is a lot. How many will actually remember to cancel their subscription 4 months later? Or even care that it raised by $9 a month once they have fallen in love with the service?

    And just because the standard is $9.99 a month doesn’t mean it needs to stay there. Netflix dropped its monthly price when it got more users (and split up its DVD by mail and streaming only services).

    • Jenna

      You make a good point! I definitely think more people will learn to love the service and make the switch to a long-term paid plan. A lot of people are still learning about services like Spotify.

      • Remi Swierczek

        Ari, There is no money in subscription streaming even at $9.99. It just does not add up to normal numbers.

        200 million full price subs makes just 24 billion or less than 50% of inflation adjusted 1999.
        200M will never happen!

        Pretty stupid up-hill battle considering that we can convert both streaming and Radio tomorrow to $100B discovery based music store. Help me to get audience with Len Blavatnik – he is the owner and might be interested in out of the box solution to almost dead music industry.

        • GGG

          If you want to try and relive 1999, by all means go for it, but rationally speaking, that won’t happen unless we convince people to spend between $15-20 on ONE album. How in the world will you convince people of that?

          • Remi Swierczek

            Counting cost of production of CD and cost of multilayer distribution 39 cents per tune is much better monetization than 1999

            At 39 cents you have expanded your buying to Pakistan and Zimbabwe. With 10x as many folks able to pay we can have $100B music industry by 2020 …and continue to grow. Let’s just convert Radio and streaming to discovery based music store.

            Mr. Blavatnik you are the owner lets talk. Your hired boys and boys at Sony and UMG do not listen, they are locked in box intoxicated by streaming smoke. Lets open the windows and ventilate the music house.

          • GGG

            You discovery thing will never happen. 39 cent songs (or like $5 albums) would actually be something I’d be for, as I’ve never thought 99cents was the best price point, and certainly not 1.29. But I fear we’re past the point of no return for sales, save something incredibly drastic happening culturally. I don’t think dropping that low would more than double sales like it may have in 2007 or something.

          • Remi Swierczek

            It will!

            Just imagine Radio with no artist/tune info.

            Same for streaming, display shows only full info on items that are already in your playlist.

            Then THERE IS NO SHAZAM or GOOGLE the PIMPS.
            Sorry, Shazam is there but wants 39 cents to ad tune to your playlist. $100B music industry before 2020.

            Simple? No, it’s PRIMITIVE!!!!

            Can I talk to Mr. Blavatnik?

    • FarePlay

      Netflix is always a poor example. Netflix is a company that is highly successful with a modest selection of streaming content; some of which they create and pay for. Where Spotify is an unsuccessful company with an enormous selection of titles, that creates nothing.

      As far as creative content goes, music stands alone as the only genre where you can get almost everything for free. As an aside, in the UK printed book sales were up 5% over the fourth quarter, while kindle download sales declined.

      • Anonymous

        Netflix also charges less and doesn’t pay per-play. What they do pay for content is well below 70% of their revenue. And they have very little competition. So indeed, not a good comparison.

        • FarePlay

          No, Netflix doesn’t charge $.99 for subs, nor do they offer unlimited free access. Have you ever considered that the entire p&l research for internet music streaming is terminally flawed? There is an unavoidable argument to be made that Spotify was always an exit strategy for investors via an IPO.

          • danwriter

            Exactly, exactly, exactly. Spotify was a creature of Wall Street from day one.

          • Anonymous

            The $.99 deal is a 3 month promotion. Netflix runs promotions all the time. Right now you can get a year of Netflix for free with certain products. You think Netflix is getting a full years worth of revenue? Not a chance.

          • GD

            The important difference is that Netflix is not changing their perceived value by regularly offering their product at a lower price. Yes the do some bundling offers but their direct to subscriber offer is one month free. Spotify has run these discounts for much of 2014. I started on a 3 month for one deal. Canceled and started back when they gave me the same offer. At this point I expect that the real price is between $3 – $5 a month.

            It’s also interesting to note that they have the ability to do these pricing tests where download services did not. Too bad there wasn’t more experimentation there to evaluate the demand curve. I’d buy a lot more mp3s at $0.39.

            Anyway, the pricing of digital goods of any kind is an interesting process so looking forward to seeing where this ends up.

  5. Anon

    i run a large catalogue and I can tell you the Taylor Swift coverage definitely had a very positive boost for Spotify

  6. Irving Mindreader

    I run a common sense factory and I can tell you that it would take > ten Taylor Swift catalogs to make Spotify cash flow positive.

  7. FarePlay

    Time to change the conversation about interactive music streaming, because clearly we have two camps with different beliefs about the financial viability for artists when they lose the ability to sell recorded music.

    Artists have an option to control their work on these services by withholding their music from interactive music streaming. More and more mid-level and emerging artists are joining superstars like Taylor Swift, Beyonce and Adele in cutting back or totally eliminating their songs from interactive music streaming and this needs to be publicized.

    I believe this is the only way back from the abyss they call interactive music streaming. No matter how you slice and dice the numbers, the majority of musicians, like any other artist who produces work for sale, must be able to monetize that work at a meaningful level to survive.

    Any talk about alternative streams of revenue have proven false for the majority of working artists. Internet piracy proved that.

    So step one for musicians and songwriters who do not believe interactive music streaming is a viable financial solution need to determine whether they have some or none of their music there. Step two is creating awareness with listeners that this is taking place and for their fans to not simply rely on interactive streaming for the music that matters to them.

    Artists need to post this on their websites and in social media. If they chose to have some or none of their songs on these services.

    This where the battle happens and the future of streaming is no longer the only future for music.

    • Name2

      Step #1 “Sell” them music which disappears with their next hard drive crash.

      Step #2 Hard drive crash

      Step #3 Profit??

      • FarePlay

        Actually, I’m a physical product consumer. So to your point, if you have one, thieves break into my house and steal all my music.

        3. I repurchase all that music again.

        Brilliant dude. Oh, buy a back up hard drive.

        The other scenario. Spotify goes out of business or all your music is lost due to a software glitch with Spotify’s servers. Sorry, forgot. You never owned that music anyway. Never mind.

    • Anon

      Most artists do not have the ability to withhold their music from streaming services. in most cases, the sound recording is owned by the label, who make that decision. In Taylor Swift’s case, it was likely her label (who she is very close with) making the case to her, and she agreed to make their joint case publicly. It was about selling more CD’s, which her label wanted because they are looking to be bought, probably by a major. Most artists don’t have the options she has.

      • FarePlay

        Sales of Independent music now represents 34% of total sales and comprises nearly 50% of Grammy Nominations. Major artists can demand that their new releases are delayed on interactive streaming sites.

        This is about perception in the consumers’ mind. A convincing case can be made that Spotify was based on the original Napster Model, by individuals from the Bit Torrent Community and Napster. Had Spotify’s model more closely resembled movie and television streaming models we would not be at this dangerous point in time where the music business, particularly for independent and mid-level artists, is in serious jeopardy.

        Really a lack of vision as to the impact their business model would have on the workers who produce content for their business.

  8. Airplay Music

    Windowing will be the big headache for streaming services. When existing or potential subscribers realize that the streaming service do not provide all of their favorite music, they will never pay $10/m…

  9. David

    The proportion of paying subscribers has not increased at all. (Total users up by 10 million, of which 2.5 million paid something, maintaining the familiar 4:1 ratio.) So there is no reason to suppose that the massive price discounts was responsible for the increase in users. The only certainty is that the average revenue and payout per stream declined.

    • Im a Fan

      I’m a fan and will never buy music again so long as Spotify gives me on-demand music for free (yes – my free trial is still churning along).!

      • FarePlay

        You summed up the problem perfectly. I’ll keep paying so you have something to listen to.

        • Name2

          No one’s got a gun to your head.

          But thanks for the subsidy, bro!

          • FarePlay

            Fortunately, nobody does hold a gun to my head. I’m just a fan who appreciates talented people who are driven by their creativity. I get a good feeling when I contributing to artists and their work.

  10. Name2

    What trenchant analysis: There are some things in life people will pay 99cents but not $10 for.

  11. Anonymous

    Musicians/Songwriters don’t be distracted. All that matters is who will this be or not be successful for:

    It may or may not be successful for those who have equity stakes in Spotify and a share of the advertising revenue. That means Spotify itself and their investors INCLUDING the major labels. Those who have a stake in Spotify are now beginning the hype and ramp up to the IPO. They will work hard to make it a success. I suspect they will succeed for themselves. BUT….

    As Spotify and other streaming streaming services are currently structured Musicians/Songwriters are dead last in the payment chain. They have no equity & no individually negotiated share of ad-revenue. Period. Musicians/Songwriters, particularly those of you affiliated with major labels will start to see the hype, requests for “playlists” etc., heat up and you will be told it will benefit you. In terms of direct income it is a total loose. As it is currently structured it will not be a “success” for the majority of you.