December 12, 2015 | Authored by: Vindicia Team Blogs
Spotify may restrict some releases to paying subscribers
Many businesses using a subscription billing model run into the issue of how they will value their services. Brands often go for the freemium strategy, where users can obtain the service for free, but upgrade for premium features. Lately, music streaming services have started to wonder how to keep listeners and musicians happy under this approach. Spotify uses an ad-supported freemium model. However, for most of the streaming music company's existence, users could access the entire music catalog, whether or not they were paying members. Now Spotify is considering blocking some of its content from free subscribers.
Spotify reconsiders its model
According to the Wall Street Journal, Spotify told some music executives that it may allow some artists to only release albums to paying subscribers, rather than the service's entire user base. Currently, about 20 million users pay for the Spotify service, along with 80 million free users.
These talks follow musician Taylor Swift's decision to remove her music from Spotify, which prompted several other high-profile musicians to follow suit. When Swift asked Spotify to make her album "1989" available only to paying subscribers, the service refused, and she withdrew her music from streaming. Coldplay followed her lead, and Adele withheld her most recent album from Spotify.
Spotify issued a statement to Business Insider, saying they are sticking with their model for now.
"We are 100 percent committed to our model because we believe that a free, ad-supported tier combined with a more robust premium tier is the best way to deliver music to fans, create value for artists and songwriters, and grow the industry," the company wrote.
Does free music work?
Some argue that Spotify will eventually have to cave to its critics and make all of its music available only to paying subscribers. In a piece for Business Insider, Brian McAndrews, CEO of Pandora, argued access to free music on demand should be limited to short-term trials. According to McAndrews, one of the fundamental problems of a freemium model in the music industry is that there's no incentive for non-paying subscribers to convert to premium.
It might be beneficial for musicians and the business to restrict some of the more sought-after content to paying members. This way, musicians will receive the royalties they desire and Spotify will be able to gain more of its revenue through subscriptions rather than ads.
Another option, as McAndrews pointed out, is maintaining an ad-supported free program for the purpose of discovery. Once customers find music they like, they will be willing to pay for the privilege of listening on demand whenever they desire.
Of course, to truly take advantage of any subscription model, it's important you have the support of a flexible subscription billing service that will allow you to offer a variety of subscription models. At the end of the day, Spotify and other music services all desire to acquire subscribers, minimize churn and encourage premium adoptions. The right subscription billing partner makes it easy to create new promotions to increase conversions while reducing involuntary churn.
Which billing platform is right for B2C subscriptions?Download