A new WSJ report reveals how the free and subscription tiers for Spotify generate royalties through at varying rates
Spotify’s two music streaming ‘tiers’, ‘Free’ and ‘Premium’ bring in very different volumes of revenue even for the same song, says research quoted by the Wall Street Journal. The Journal quotes research from Audiam, a music royalties research firm, to say revenue from Spotify can vary greatly, depending on which tier is being used. The online music engine’s Free service lets users browse through the same songs and artists as offered by the Premium service. Except, this has ads and album songs are shuffled. Spotify encourages the Free tier so users can familiarize themselves with the service and sign up for a $10 monthly subscription.
Audiam research has found the Free and Premium tiers attract the same number of users. Except that the Free tier only generates 9% of Spotify’s $1 billion, 2014 revenues. Also that Premium users stream far more music than Free users. In March, both tiers – 60 million users combined – clicked for four billion streams. In 2014 it claimed 28% of Spotify users were fee payers. Now that number is 25%. Spotify has different sized pots of money from which to pay off royalties. It takes 5 to 7 plays for a track to make the same value in the free tier that it generates in the Premium tier. Although this value has risen, because of another paradox. The more Premium users, the less the value of each Premium stream. Currently, the value of a song streamed on the Free tier is 0.14 of a Cent, the Premium value is 0.68 of a Cent. In January, it was 0.81 of a Cent.
Famously, Taylor Swift removed her music from Spotify, when the service refused to place her music in the Premium tier only. Many in the industry would like to see the Free tier curbed, by charging after a free trial period or the restriction of song choices for free users. “The more people listen, the more likely they are to keep paying, which is what all of us, Spotify, rights holders and artists, should want.” said Jonathon Prince, Head of Communications for the Spotify service, in an interview with the WSJ. Spotify’s up-coming competitor, Apple, plans to launch its own streaming music service at its WWDC scheduled next week, hoping to increase its position in music distribution with a similarly priced service.