The end of freemium for Spotify is soon coming. Freemium is defined as a price marketing strategy in which a product or service, usually a digital application or other online media, is provided free of charge, but money is charged for extra features or digital goods. Freemium is used in order to get customers without scaring them away by making them pay for the application. Spotify has been freemium from the start but they might not have to be because they have become big enough. Since they have grown a tremendous amount, they could choose to discontinue the Freemium model. Spotify’s numbers were released and an estimated 37 million people are subscribed to Spotify. It is now second in the music streaming industry behind Apple Music. The amount of growth is huge. It is nearly 10 times bigger than its other competitors, Tidal, mp3skull.world and Deezer, and is slowly gaining more and more market share. The music streaming industry looks like it has two top dogs. Apple Music and Spotify are the future of music streaming.
Spotify implemented an impressive marketing strategy to attract more customers. 0.99 cent for the first three month subscription is a very successful tactic in getting new customers. The usual price is 9.99 per month. it is obvious that the best way to get more subscribers would be to lower the cost. Spotify should cancel their 9.99 monthly subscription and bring that price a lot lower. The chart below shows how the discounted price model has helped subscriber growth substantially. Tidal offers free trials for a short period of time. Apple music also offers discounted rates that still cost more the the 0.99 cent for three month subscription. The chart shows that offering a discounted subscription for a longer period of time accumulates more customers then short term free trials and discounted offers.
According to Music Business Worldwide, 4 million of Spotify’s newly acquired 7 million subscribers were on promotional offers and 1.5 million of those new customers are expected to leave when their promotional offer ends. This is a 79 percent conversion rate which is awesome. Spotify has 100 million users including the free accounts. These impressive numbers could be the end of freemium for Spotify. Majority of free accounts usually never turn into paid accounts and their subscription model is proving to be highly efficient. Freemium is a good strategy to companies to start out. It is practically necessary for new businesses. However, Spotify has outgrown that stage and changes are needed. The music market is for ever changing. Tidal and Apple Music focus on exclusives while Spotify should focus more on personalized algorithmic technology and aggressive discount price models.