Spotify Adds More Benefits to its Free Service – Users Will Love It; Investors Don’t

Spotify Free

Music streaming service Spotify (NYSE:SPOT) has today announced an update to the Spotify free version of its service that will allow mobile users to access more songs on-demand.

Currently, Spotify is available in two forms; the free version or the premium version. The Spotify premium version costs $/£9.99 per month, and grants unlimited ad-free access to Spotify’s entire music library on any device, with the ability to download songs for offline listening, too. 

The Spotify free version depends on your device. If you are using Spotify on a computer or a tablet, the free version will still allow you unlimited access to Spotify’s entire music library, as well as the ability to create playlists, but you can no longer download songs for offline use. There are also a limited number of track skips per hour. Seems reasonable, if you’re willing to put up with probably the most annoying adverts in the world placed between every few songs.

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The mobile Spotify free version is less generous, however. Users can still play songs from any artist, but Spotify will not allow you to choose which ones; instead, it shuffles all the artists’ songs. In addition, you still have those annoying ads and track skip limitations. The restrictive mobile version is certainly Spotify’s way of prodding users into downloading the Premium service. Or rather, it was.

Gustav Söderström, Spotify’s R&D officer, has today announced that users of the free mobile version will now be able to listen on-demand to any song in certain playlists without the forced shuffling. Spotify already uses AI to construct playlists based on what it thinks a user will like, based on their song search history. Now, Spotify will give free mobile users 15 of these tailored playlists (containing about 750 songs or 40 hours’ worth of music in total, according to TechCrunch) to listen to. Each playlist has a different theme, such as top hits of the day, a randomized daily mix, and a “discover” playlist full of bands you might like but don’t yet know. 

A low-data mode is being added too, which will reduce the amount of mobile network data used by the app. This will be useful for users who have low-cap data plans and comes across as a free alternative to the offline mode offered to premium users. 

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This is great news for mobile Spotify users, but investors aren’t pleased. From a financial standpoint, giving customers less incentive to pay Spotify money doesn’t really seem like an attractive business model. As such, stocks in the firm are down -2.54% to $154.02 USD per share today, bringing the firm’s market cap to $27.5 billion. 

But Spotify doesn’t see it this way. “Spotify has over 90 million free users. It’s where 60 percent of paid users start out,” said Söderström at an event in New York. “The company’s goal is to keep free users satisfied and not have them feeling like second-class listeners.” From this perspective, it doesn’t seem like such a bad business model after all. Keeping users is important, even if they’re not paying anything. Especially so if the numbers show that most of them will end up purchasing the premium model anyway. What’s more, Spotify still makes ad money from free users.

Either way, it comes down to how a firm balances customer satisfaction with investor satisfaction. It’s refreshing to see the former winning out. 

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