At the end of 2021, the Swedish music streaming service Spotify published statistics showing that just over 380 million music lovers worldwide are active monthly users of its services. And paid subscribers – more than 155 million people.
The popularity of the streaming service is largely due to the fact that it has a completely free version that you can use on an ongoing basis. It attracts a huge number of streaming music fans around the world. But is the free version really worth it?
The formula for attracting subscribers has been the same since the beginning of the company: offering a free modality, supported by ads, but actually performing the role of transferring some of these users to the Premium plan (in the early years, Spotify even had a pass-through mode, it cost just over one euro and gave access to the entire collection for 24 hours).
Through the sale of shares, the company raised more money for growth. On the other hand, there has been increased pressure on financial returns – to this day, Spotify does not know what profit is.
Some investors and members of the music industry feel that the free mode should be even more limited or even discontinued, forcing the upgrade to the Premium plan. This would be a similar approach to Apple Music, which only has a paid modality.
If you’re a free mode subscriber and don’t intend to switch, don’t worry. It’s impossible to predict what will happen to Spotify in the next ten years, but one thing is certain: the chances of the free plan being discontinued are very slim.
Apple can continue with the strategy of only offering a paid plan because it has its own ecosystem to promote Apple Music. Spotify, on the other hand, can only rely on its own platform, so it needs to be more flexible. In any case, the approach seems to be working: out of 480 million active users today, more than 150 million are paying.
That’s still not enough, which is why some fear Spotify’s bleak future. But given that the company has transformed a struggling industry, it’s best to give it time.
Job done, overall: Spotify is investing in technology, moving closer and closer to independent artists, betting on merchandising, partnering with social media to generate attention, and trying to balance the money coming in and paying royalties to artists.
The more expensive plan could be a breather for Spotify, which is losing money every year and still fails to turn a profit even after more than 15 years of operation. Spotify’s big problem is that when the number of users increases, the cost of music royalties increases in even greater proportion, exacerbating the company’s situation.
The first name that comes to mind when it comes to music streaming, Spotify has almost never turned a profit and largely survives on the money of investors who believe in the future of the business.
Spotify ended the fourth quarter of 2021 with positive financial results, but disappointed the market. Although the number of active users almost reached the 400 million mark, the company’s revenue grew by only 7% compared to the third quarter of 2020 and reached $2.83 billion.