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Is Spotify about to go free? And would that be a good idea?

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Exciting rumours abound as Forbes magazine reports that music-streaming service Spotify could be able to do something amazing, and make it's mobile apps free to access to non-paying customers.

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As things currently stand Spotify offers a free service to users of its desktop app - an iTunes-like piece of software that gives your Mac or PC access to pretty much every track ever recorded (unless you like music from really obscure record labels), for up to 10 hours of playback a month. The free service is funded by advertising - every few tracks you'll get a short radio-style advert, which seems like a fair trade for easy access to so much music.

On top of this they offer two paid services: Spotify Unlimited, that for £4.99 gives desktop users no time limits on the amount of music they can listen to in a month - and Spotify Premium for £9.99 that does all of this - but also enables access through the Spotify iPhone and Android apps. Word is though that this could all be changing - with no monthly fees for using the app.

And whilst this does remain unconfirmed and staunchly just a rumour - it does raise the question of why Spotify would do something like this. After all - according to Forbes they have 24 million existing users, 6 million of whom are paying them every month... why take the pay cut?

And this is where we start to worry that the economy is in a bit of another internet bubble. The thinking is that the number of users is more important than how much money they're bringing in - citing the examples of how both Facebook and Twitter became worth multiple-billions of dollars on the stock market, despite the smaller matter of nobody knowing how to make money with them. The theory is that the best thing for Spotify to do is to grow the user-base into the many, many more millions ("Hey would you like unlimited free music?" "Yes please", says everyone)... and then it's the time to worry about how to make money out of it. 24 million may sound like a lot of people... but apparently it's not enough!

As far as I can tell... this perverse logic makes a weird kind-of sense. Especially when you consider what's changed: When Spotify launched it was a big deal because it was the first of it's kind - the first service to have done the deals with the major record companies, and the first to package all of the music into an attractive and easy to use service.

A few years on though and there are a tonne of competitors who have similar deals with the labels - and the scary thing for Spotify, who are something of a corporate minnow, is that competitors in many cases are linked to much bigger and scarier companies: Apple have launched iTunes Radio in the States - which is the same sort of thing, but with built in integration in every iPhone - and Microsoft have just launched Xbox Music alongside the Xbox One... which has their corporate might behind it. For Spotify to remain a big player, who device manufacturers will fight to get on board, they need to grow quickly so that they're important to tens of millions of people.

So it's a tense decision to be made: Should they gamble their current relatively comfortable existence for potentially bigger rewards later on? It seems like they might have no choice.

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  • Truffol

    Unfortunately Spotify's current financials are bad enough as their advertising revenue barely covers their music royalties. While an ad every few songs is "fair trade" to users they are essentially a money loser to Spotify without monthly premium from its millions of paying subscribers.

    You are absolutely right - Siliion Valley and Wall Street are valuing these startups on the size of their user base rather than their financials, hence leading to these "growth hacks". Definitely not healthy...

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