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Spotify to halve access to free service
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Spotify is scaling back the free aspect of its music service, limiting the total amount of music users can listen to and the total number of times a single track can be played. The changes, which come into effect on May 1, mean that users of the free service will find their listening time halved from 20 hours a month to just 10. Users will also only be able to play individual tracks five times before having to purchase the song. The move has angered some fans, but CEO Daniel Ek says the changes are "vital" to guaranteeing the future of Spotify.
The changes will affect those who have used Spotify's free service for six months or more with newer users moved over to restricted access after a six-month usage period. Writing on the company blog, Ek notes the changes are likely to affect heavier users of the service and will encourage them to try Spotify's paid-for service. "Making Spotify available to millions across Europe has seen the service become incredibly popular," he says. "People are listening to more music and from a wider range of artists than ever before, and are giving up on piracy, which is exactly what we hoped would happen."
However, the company insists the changes are not simply a mechanism to convert free users to paying customers, saying that the free service is still an essential part of the company's offering. The Swedish streaming service currently has 6.67m active users, 1m, or 15%, of who are paying customers - a number spokesman Jim Butcher describes as "phenomenal for a freemium business".
"This is not a premium conversion strategy," Butcher tells StrategyEye. "What is driving users to paid is the free service. That gets users engaged with the service like no other. Spotify has captured a youth demographic that's been very hard for the music industry to monetise - but their perception of the value of music completely changes as they get invested in the experience. So the ‘free' experience in fact pays big dividends. That's why it is so vital we continue to make the free service available."
The changes are likely to be a response to pressure from the music labels that license their content to the Swedish streaming service, according to comments in the Financial Times. The labels have long been way of free music streaming services, with Warner saying in February last year that ad-supported services did not have a positive effect on the industry. The move comes as Spotify continues negotiations with the labels over a US launch, which was scheduled for the end of 2010 but has since been delayed.
