Great explanation of what is the impact of growing music streaming services to the overall music industries
Answer by Mattias Petter Johansson:
Disclaimer: I work at Spotify (not PR, I'm a developer).
Spotify is growing while downloads and physical sales are shrinking, so the knee-jerk reaction is to blame Spotify for "cannibalizing" them. But the problem with that reasoning is that downloads are dropping just as quickly in markets where Spotify doesn’t exist. Canada, where we only just recently launched, is a great example, because it has a mature music market very similar to the US.
I really think the notion that we "cheapen" music is ludicrous. Spotify has a rapidly growing base of 12.5 million paying premium users – people paying 120 bucks per year, 69% of which is paid to whomever owns the music.
This is twice what the average paying US music listener spends!
I'd also like to point out that a very big chunk of our premium users are under 26 – i.e. they are part of what was labeled "generation free" – people with abundant access to pirated material as they grew up. It was said that these kids would never pay for music.
Yes, Spotify does have a free-forever account type, but that is our not-so-secret sauce to driving premium subscriptions. No free, no paid – 80% of our premium users start out as free users. We've learned that a paltry time-limited trial just is not enough to make premium users – people need a lot of time with a service before deciding to pay for it, and need to know that their playlists will not be held hostage if the monthly credit card charge bounces.
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