I have long argued that mid priced subscriptions are crucial to driving the streaming market, and the burgeoning success of Spotify’s mid-priced-subscriptions-by-stealth strategy provides a bulging corpus of supporting evidence. Mid Priced Subscriptions Will Drive The Market, Even If By Stealth Once they get used to paying the majority tend to stick around when the price goes back up. They deliver the impact of mid priced subscriptions, which is enough to to hook those wavering free users.
This is where price promos come into play. This was because most of the likely subscribers had already been converted and so the majority remaining were freeloaders who were never going to pay, and warm prospects who just couldn’t bring themselves to pay 9.99. But last year record label execs started to observe that free just wasn’t converting at the same rate it once did in mature markets like the US. Does this mean the end of freemium?įreemium proved highly valuable to Spotify in its earlier years and continues to be an important entry strategy for new markets. So price promos are converting at more than double the rate of freemium. Meanwhile Spotify’s total user base is 100 million which means the free-to-paid ratio is 37%. That might sound high but it actually represents a 79% conversion ratio, which is a stellar rate by anyone’s standards. According to Music Business Worldwide, 4 million of Spotify’s newly acquired 7 million subscribers were on promotional offers and around 1.5 million of those are expected to churn out when their promotional period ends. Which is another way of saying that 9.99 just isn’t a mainstream price point.Īs the IFPI’s 2015 numbers revealed, the average label revenue per music subscriber fell globally from $3.16 in 2014 to $2.80 in 2015, with price discounting a key factor. In short, 9.99 needs to stop being 9.99 in order to appeal to consumers. Which itself comes on the back of similar offers having supercharged Spotify’s subscriber growth for the last 18 months or so. But there is a more important story here: Spotify’s accelerated growth in Q2 2016 was driven by widespread use of its $0.99 for 3 months promotional offer.
It is beginning to look suspiciously like a 2 horse race.
It also means that Spotify is now nearly 10 times bigger than Tidal and probably Deezer (which hasn’t reported numbers since its France Telecom bundle partnership ended). ‘Leaked’ Spotify numbers emerged today indicating that the streaming service has just hit 37 million subscribers, which puts more clear water between it and and second placed Apple Music, despite the latter’s recent growth.
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