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Summary:

Spotify has doubled the apparent success of its freemium model by changing the way it reports one number.

Spotify's Daniel Ek And Martin Lorentzon
photo: Spotify

Spotify has doubled the apparent success of its freemium model by changing the way it reports one number.

– Until today, Spotify was claiming 750,000 paying subscribers amongst 10 million total users – a 7.5 percent premium conversion.

– Today, though, it declared a million paying subscribers and said this instead was 15 percent of its active users within the last 30 days – a group it didn’t initially put a number on this morning but which, talking with paidContent:UK later, it explained is nearly seven million.

Picking the active user count on which to judge its paying base, rather than the total, inflates the apparent success Spotify is having converting free, advertising-exposed listeners in to customers – something U.S. labels prefer.

Spotify’s new seven-figure number, built up in its seven European and Scandinavian countries, is likely aimed at portraying itself as more popular than North America-only Rhapsody, as it moves closer to a launch in Rhapsody’s back yard…

Just like Spotify, Rhapsody’s last publicly-disclosed user count was 750,000 – a number it’s sticking to for now. Asked by paidContent:UK today, the company didn’t disclose an updated figure and tried to gloss the previous one.

750,000 subs is our latest figure, which makes us the largest player in the U.S. by a long way,” a spokesperson said. “It’s growing every day and we expect to release new figures shortly. Based on figures we have seen, we comprise more than half of the market and consumers love our service and our apps.”

Spotify’s one-upmanship gives it a sort of upper hand, as it looks to win its final major-label deals before U.S. launch – it suggests Spotify can sign more subscribers than Rhapsody despite (or, probably because of its majority-free model). But a pissing contest doesn’t necessarily help win contracts. And Rhapsody has built its paid-up base without the lure of a free taster like Spotify’s.

Meanwhile, Spotify’s declaration also allows us to make an interesting further observation about the service’s stickiness, beyond simply the freemium conversion rate. We estimate the total of active and inactive users has now risen to about 13 million. In which case…

– [Glass half-full]: About half of people who have ever tried Spotify (the active base as a proportion of the total base) liked it enough to continue doing so.

– [Glass half-empty]: About half of those who have ever tried Spotify haven’t done so in the last 30 days. Where have they gone?

What offerings would your ideal music streaming service have? Are any of the leading platforms — like Spotify, for example — up to par with your needs? Join the discussion on Facebook

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  1. only active users really counts tho.
    the inactive ones arent really costing it a penny as they’re not using the service / running up record label bills

    obviously a service with the amount of hype Spotify has generated is going to attract a significant no of people who then decide it isnt for them

  2. Greg Golebiewski @znakit Wednesday, March 9, 2011

    The number and the statistical gimmicks around it are certainly good news to Spotify investors (who so far have been bleeding money by buckets). But what does they mean to the musicians and the industry?

    If someone managed to convince Microsoft to use a similar freemium model to distribute the next generation of Windows, they might have been able to sign up 1 million users willing to pay 5 or 10 bucks a month for the software in just one day. But would this be creating or destroying value?

  3. I think that Spotify amassing a million paying customers across a number of countries, languages, currencies and licensing regimes in Europe is pretty impressive, compared to Rhapsody’s 750k in one country with a fairly homogenous music taste and a huge number of homegrown artists. That factor shouldn’t be discounted.

  4. 1,000,000 is greater than 750,000. Substantially–33%.
    % of active users is the relevant business parameter–those for whom costs are now being incurred.

    Priority on free downloads and trials is wrong.
    Are downloads, trials, and inactive users relevant for the next?
    And, it’s early; those who trial and are now not active may become active in the future.

  5. The numbers on spotify just don’t add up! Say they do have 1m “active” users, and let’s be generous and say they are ALL paying top whack, $9.99. that’s $9.99m per month, so let’s call it $10m….per month.

    Multiply by 12 gives you $120m per annum….now this does not include ads but let’s keep it just on the premium payees for now, as the ads are “supposed to pay for the freebies “!

    And let’s be generous again say they make 20%, that is $24m per annum, and I read that they are just about to close a $100m round for 10%, valuing them at $1bn, that is x40 profit…..even with these charitable figures. There’s some nasty stuff gonna hit the fan soon!

  6. Another thing to realize is that for most in Europe they can’t get (easily) much of the “free” content that is available in the US. So Spotify is by far the option you chose if you want music. The commercials are pretty intrusive so if you have the money you are willing to pay. I don’t think the same dynamics exist in the US so paying subscribers (and even free ones) will be harder to come by there.

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