Analysis

How to interpret Spotify’s latest 15m-subscriber milestone


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spotifyThe last quarter of 2014 was a problematic one for Spotify, with Taylor Swift’s pullout sparking a renewed debate about its business model and musicians’ streaming income.

However, it was also a period of sharp growth for Spotify, according to figures revealed by the company yesterday. Having reached the milestones of 50m active users including 12.5m subscribers in early November, Spotify ended 2014 with 60m users and 15m subscribers.

To put that into perspective, in the last two months of the year alone, Spotify added more new paying subscribers than Rhapsody’s total subscriber count – and the latter is a total that took a decade (plus the acquisition of Napster) to build.

Over 2014 as a whole, Spotify added around the same amount of new subscribers as Deezer’s 6m total. And in the two years between December 2012 and December 2014 Spotify tripled its active users from 20m to 60m. It remains the largest and the fastest-growing streaming music service, in short.

Caveats? Spotify launched its family plan in November 2014, enabling subscribers to add accounts for up to four family members at half-price – $4.99 a month. But this is far less likely to have inflated Spotify’s subscriber total than a separate promotion offering three months of Spotify Premium access for $0.99, which went live in early December.

That will certainly have been a factor in the 2.5m net additional subscribers added in the last two months of 2014, although the corresponding growth in overall active users suggests that Spotify’s free mobile tier remains a wide funnel for the company. Expect plenty more arguments about the value of that funnel to the wider music industry, creators included.

When Spotify announced in mid-November that it had paid $2bn to rightsholders so far, CEO Daniel Ek was uncompromising in his defence of the freemium model as the reason: “More than 80% of our subscribers started as free users,” he wrote then. “If you take away only one thing, it should be this: No free, no paid, no two billion dollars.”

Spotify’s free tier is still the most reliable path to paying subscribers the streaming market has seen so far, but one of the company’s challenges in 2015 is to keep the pace of growth up once its current price promotion runs out.

Stuart Dredge

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