Spotify Free Users Are Growing Faster Than Paid Subscribers – But Why?

Spotify free users
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Spotify free users
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Photo Credit: ConvertKit

Spotify free users are growing at a faster pace than paid users, according to a just-published research finding.

A report from eMarkerter suggests that Spotify will hit 41.5 million free users  in the US this year. That’s an increase of 9.7% over 2020, and part of a trend that finds ad-supported listeners making up an increased share of Spotify’s platform. If that trend continues, Spotify is expected to have as many as 52 million US-based ad-supported listeners by 2025.

“The rise of podcast listening on Spotify is causing ad-supported listeners to increase as a percentage of total Spotify listeners,” the report concludes. “As this trend continues, there will be just about the same number of ad-supported listeners as Premium subscribers by 2025.”

Overall, that total number of listeners using the Spotify platform is expected to increase 10.1% this year. Spotify is expected to surpass 83.1 million monthly users, making it the most popular audio streaming service in the United States. For the first time, Spotify is expected to reach 30% of US internet users in 2022.

Spotify has placed significant bets on drawing a massive listening audience with exclusive podcasts. In fact, podcasts may be a bigger focus for Spotify than music streaming. One reason for this: Spotify is currently building up ad-targeting tools for podcasts that serve up more revenue than music listeners streaming their favorite songs.

Spotify reported a 21% loss in ad revenue in Q2 2020, showing its reliance on people listening to ads – either between tracks or during podcasts. But that reliance on ad-supported listeners doesn’t help artists get paid. Pound-for-pound, premium subscribers contribute far more, with ad-supported seriously lagging behind. Streamed music makes up 83% of recorded music revenues in the United States – of which Spotify paid $5 billion to music rights holders in 2020.

On a blended scale, industry estimates suggest Spotify pays about $4,000 for a million streams. That’s less than a half of a cent ($0.005) per stream. That means artists need to earn millions of streams to make anything substantial from their music. Spotify’s free tier allows users to listen to music with ads, but that reduces the average amount that each listener contributes to the pot for artists. Apple Music does not have a free tier and pays artists close to $0.01 per stream.

Spotify says 13,400 artists on its platform make more than $50,000 annually. But there are more than 7 million artist profiles on Spotify, with a vast majority of those accounts failing to reach even $1,000 in earnings from their music.

8 Responses

  1. Ted

    “Spotify says 13,400 artists on its platform make more than $50,000 annually” How do they know that this is correct? Most of the money paid out by Spotify is paid directly to the people who own most of the music, the Record companies. And each artist has a separate and usually different contract with their record company. I think when they say that 13,400 artists make more than $50,000 annually, this is incorrect. How could they know what the artists receive unless they have the individual contracts that artists sign with their Record companies. PROBABLY this $50,000 is sent out to the Record company and very few artists will get anything near $50,000. More like $4000 or less!! Maybe you should talk to the artists and get their numbers after they have paid off all the expenses. This statement “Spotify says 13,400 artists on its platform make more than $50,000 annually” is a JOKE! Don’t believe anything you hear about Spotify. And big thanks to all those FREELOADERS who pay nothing then expect quality music to continue when the artists can’t even feed their families. Nice people these music fans!

    • G

      If they really receive 60000 new tracks a day, that’s not even 1% of the artists.

    • Hello. Wake up.

      Most of the artists on Spotify own their content, which means they get paid directly.

      • Reality Chick

        Which is a higher percentage of artists who actually make it going the traditional record label route.

    • Electribe

      Ted, I make more than $50,000 a year from Spotify as an indie artist. There’s more of us than you might think. Nobody in their right mind needs to sign a major label contract today, or, even a minor label contract.

      You act like Spotify is somehow responsible for what the artist gets paid by the record company. That’s like saying Sam Goody or Tower Records was responsible for what labels paid their artists in the 80s and 90s.

      Maybe you should educate yourself on what goes on with the music industry? You sound like a complete knob whose mommy needs to change his diaper.

  2. Anonymous

    Comparing the YouTube experience getting subscribers with this study would give us new information.

  3. Anonymous

    No doubt that the music business has changed significantly in the past decade. But many industries have had to change and adapt to new technology – automotive, retail, electronics, manufacturing, education, etc, etc. Get used to it.

  4. casual listener

    Disappointed that Amazon Music wasn’t included in the data. They have a very competitive product in the music streaming business and I’d like to see their expected impact on the industry. Spotify has been the industry leader in streaming services but can they maintain this lead with major competitors now catching up/surpassing them ?