Spotify, the streaming music service, has grown by leaps and bounds in just two years.
The company recently announced that its subscribers now top 15 million – which flies in the face of many skeptics who think that people won’t pay for music online. The company offers both free and paid tiers for access to a library of hundreds of thousands of songs. Just eight months ago, subscribers were in the 10 million range. About a quarter of all users choose to subscribe for $10 per month access to commercial-free, mobile music.
Many subscribers, lots of money for Spotify. Since 2012, subscriber ranks have tripled and the streaming service has paid out more than $2 billion in music royalties in the past six years since its launch. Record companies and distributors claim that Spotify is one of its top revenue sources.
But…there is also criticism. However, Spotify’s success has become a focal point for criticism about the music industry as whole. Consumers have shifted from purchasing CDs and downloads to streaming music directly from the Internet, and often for free. Major music labels have put pressure on YouTube and SoundCloud (the two most popular free outlets) to generate more revenue for their music. Recording artist Taylor Swift famously removed her catalog of songs from Spotify under claims that the service would not restrict access to paying members only, and were therefore limiting Swift’s profit potential.
“Our free service drives our paid service,” said Daniel Ek, co-founder and chief executive in a blog post in response to Swift’s withdrawal. The “freemium” model lets users stream a limited amount of music with commercials for free, but offers premium access to more music and mobile streaming for a fee.
Swift’s public dispute may have actually prompted an increase in user growth. With so much media attention on the withdrawal, the service was introduced to new members. Just two months ago (before the dispute), Spotify reported that it had 12.5 million paying subscribers.