Spotify Expands Free Tier With On-Demand Playlists and Data Saver Mode

[archer75]

I have listened to Spotify, Apple Music and Pandora for hours at work over the past year. Spotify playlists are far better. The "Your Daily Mix" playlists are exceptional. Created by genres or a mixture of music you like. Apple Music, on the other hand, has pretty weak music selections that are mostly geared towards corporate music (mostly radio stuff). Pandora is just too repetitive. They play the same songs over and over. No mixture of hidden tracks or gems like Spotify.

Spotify tends to stick in music that doesn't quite fit what you're listening to. Songs that just don't make sense for the playlist. The spotify daily mix does some weird stuff for me. Apple music is even worse in this regard but I have discovered some stuff there I otherwise wouldn't have.
Pandora just seems to get it. The songs fit together better. No matter the playlist i'm listening to. Though i'm not a fan of the pandora premium tier.
I've been using streaming music services for well over a decade now. Rhapsody and some others in the early 2000's. I also enjoy slacker. But these days i'm mostly using apple music as it has an apple watch app and siri is part of my uconnect in my truck so I can just tell it what to play. If it weren't for those things i'd use spotify more.

And of course, it goes without saying, music is incredibly personal. Threre's something for everyone out there.

 

[Carnegie]

Not even close. Spotify lost more than $601 million last year. That's mostly due to having to pay royalties for the free tier. The ads do little to make up for the royalties they pay for the music streamed.

Spotify now has a positive gross margin on it ad-supported tier. So the revenue it gets from that tier is more than enough to cover the royalty costs, as well as the distribution costs and some other things, associated with that tier. The royalty costs, as well as the revenue, for that tier are of course substantially smaller than for the premium tier - both in totals and on a per-user basis.

That said, Spotify lost - on paper at least - quite a bit more than $600 million last year. But the bulk of that loss came from finance costs and was a loss only in accounting terms. It wasn't, e.g., from operations. Without getting too far in the weeds in explaining it: Spotify lost a lot on paper due to its creditors being able to convert debt to equity at a favorable (to them) rate. Because the value of Spotify's stock increased, the conversion to equity at a lower price shows up as a financing cost and adds to Spotify's reported loss.

In reality, the conversion diluted existing Spotify shareholders. One way to look at it is this: Instead of doing a public offering and raising money through the issuance of new stock (which money might have been used, in part, to pay down Spotify's outstanding debt), thus diluting existing shareholders, Spotify raised money (which came in the form of reduced outstanding debt) and diluted existing shareholders through creditors converting existing debt into equity.
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Ads don't pay for all of the free tier. Not even close. Ads don't pay for most of the free tier either.

Spotify's ad revenue is tiny compared to their premium subscriptions... so it's actually the paying customers who are subsidizing the free customers.

At least that's how I understood it when this topic has come up in the past. Someone can correct me if I'm wrong.

EDIT: I just found some numbers. Spotify's ad revenue us just 10% of their total revenue.

Basically... 10% of their revenue comes from ads... yet their free users represent 45% of their userbase.

So yes... it appears that Spotify's paying customers are funding their free customers.

Back to the topic. Artists get paid on both tiers. Almost all of the money Spotify pays goes to the artists, labels, publishers, etc.

Spotify pays so much... that there's no money left for themselves. That's why they have always posted a loss every year since their inception.

Yes, Spotify generates far less revenue from the ad-supported tier as compared to the premium tier. But the costs associated with the ad-supported tier (most notably, royalty costs) are also far less.

As I indicated in my previous post, Spotify has a positive gross margin on its ad-supported tier now.

 

[Juicy Box]

Technically incorrect. They make billions in revenue every year. But I know what you're saying. They haven't made profit. Amazon didn't turn a profit for many years.

I was going to reply the same thing, almost exactly what you posted, even about Amazon.

Many people forget that Amazon went years without making a profit.
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I find Pandoras playlists to be the best out there.

I think Pandora is great.

I have only tried a handful of music streaming services, and when Apple provided ad-free iTunes Radio, I pretty much just listen to that. When they took iTunes Radio away from iTunes Match subscribers, I tried a few services, and I found that Pandora seem to have the best mix of music in their playlists.

I was annoyed with Apple when they took iTunes Radio away, but I didn't realize how crappy their song selections were until I tried Pandora.

I remember being on a romantic vacation with my wife, both of us relaxing in a giant heart-shaped tub, enjoying iTunes Radio meditation playlist. All of a sudden, Korn started playing, it totally disrupted the mood. This stuff happened all the time, but not with Pandora.

I might give Spotify a try, anyone know if they have a CarPlay app?

 

[Jdshewman]

And of course, it goes without saying, music is incredibly personal. Threre's something for everyone out there.

I agree it is about personal preference. I am big into Indie music and listening to new stuff all the time. Spotify is perfect for it. One of the fav new playlists is Coachella's "Made in the Shade" playlist on Spotify.

 

[JGIGS]

These playlists right there are one of many reasons I stick to Spotify. Their playlists selection are yet to be beat

I hear this all the time honestly haven't used spotify's playlists selections but always hear good things. I've been pretty pleased with some of the ones that AM has for me, especially the weekly new music playlist.

I like AM's sound quality better (but that's probably being picky against spotify's paid tier) and all the work I've done rating my music and creating smart playlist are why I stick with Apple. If spotify started having 5 star ratings and smart playlist I would consider jumping ship but AM I believe also has a bigger catalogue so AM for the win in its current state for me.

 

[Michael Scrip]

Many people forget that Amazon went years without making a profit.

Yes... Amazon didn't make a profit for years. But isn't that because they spent every cent of profit on expansion?

In the beginning, Amazon only sold books. But now they sell almost everything! All their money went to make a bigger company.

Hard goods, digital services, they're a big part of the infrastructure of the Internet... and doesn't Amazon have a fleet of airplanes now?

My point is... Amazon is quite a different company now than they were in the beginning. And it costs a lot of money to enter new markets and industries. And to build warehouses and distribution centers. And to develop transportation services. And so on.

On the other hand... what is Spotify doing differently now than they did 10 years ago? They're basically doing the same thing they've always done: streaming music. The problem is... streaming music is an expensive business to be in.

And we can thank the record companies for that. In order for Spotify to simply operate... they have to spend almost all of their money on music royalties.

Spotify's main business (only business?) is distributing digital music. Seems simple, right? Sending bits over the Internet. Yet those costs are insanely high because of the royalty rates.

Personally... I don't think it makes sense here to say "Amazon didn't make a profit... but look at them now!"

There's almost nothing comparable between Spotify and Amazon.

Hell... for all we know... Amazon might be losing money on their streaming music service too. Thankfully... they have plenty of other businesses to make money on.

But Spotify doesn't have that luxury. Streaming music is their business.

To sum up:

Amazon made zero profit because they spent all their money on expansion into different industries. And it worked. They're the "everything" company now.

Spotify made zero profit because streaming music is a terrible business to be in. The costs are simply too high to be sustainable. Too much stuff is outside of their control (record labels)

Maybe it's impossible for any company to make a profit solely with streaming music. Has anyone considered that?

 

[dsburdette]

Has Spotify provided a means yet to PURGE all of the cache on your iPhone or do I STILL HAVE to delete and reinstall the freaking app? As they say, "We can send a man to the moon ... "

 

[archer75]

Has Spotify provided a means yet to PURGE all of the cache on your iPhone or do I STILL HAVE to delete and reinstall the freaking app? As they say, "We can send a man to the moon ... "

No clue. Never had a need to. Not sure why I would?

 

[dsburdette]

No clue. Never had a need to. Not sure why I would?

Because their cache just keeps growing, and growing, and growing every time you play music. When you wonder why you have no space left on your phone, you will find that you have to delete the Spotify app and reinstall it to clear it's temporary song cache. It's annoying as f&*#.

 

[archer75]

Because their cache just keeps growing, and growing, and growing every time you play music. When you wonder why you have no space left on your phone, you will find that you have to delete the Spotify app and reinstall it to clear it's temporary song cache. It's annoying as f&*#.

I've never noticed that. Never ran out of space. Just opened up storage and looked at spotify and it says the app size is 87.2mb and documents and data is 42.3mb. Spotify has been on my phone since I got the iphone 8 in september. I was subbed to it for a few months and then a few months on apple music.

 

[dsburdette]

I've never noticed that. Never ran out of space. Just opened up storage and looked at spotify and it says the app size is 87.2mb and documents and data is 42.3mb. Spotify has been on my phone since I got the iphone 8 in september. I was subbed to it for a few months and then a few months on apple music.

I deleted and reinstalled my app within the last few months and it's already at 912.8MB. I imagine you mustn't use it that much? I'm not even a subscriber, I just let it shuffle my playlists when I'm on a run or doing yard work. Before this recent episode I was around 4+GB of storage. It's currently the 4th in the list for apps using storage on my phone. That's fine but hence the reason I wish they gave you an in-app method for clearing storage cache w/o having to delete the app first.

 

[archer75]

I deleted and reinstalled my app within the last few months and it's already at 912.8MB. I imagine you mustn't use it that much? I'm not even a subscriber, I just let it shuffle my playlists when I'm on a run or doing yard work. Before this recent episode I was around 4+GB of storage. It's currently the 4th in the list for apps using storage on my phone. That's fine but hence the reason I wish they gave you an in-app method for clearing storage cache w/o having to delete the app first.

I used it a lot today and the file size hasn't changed.