Spotify's Subscriber Growth Accelerates, Appears Fueled By Mobile Listeners

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Ben Stiller in "Zoolander."

How did Spotify get its most recent 2.5 million subscribers? Free mobile listening, for the most part. 

The leading subscription music streaming service announced Monday it has 15 million subscribers to go along with 60 million monthly listeners. An industry source tells Billboard 80 percent of new subscribers came from the free mobile. Spotify has been consistent in its messaging over the last eight months -- it's the same figure CEO Daniel Ek offered in a November blog post in November after Taylor Swift pulled her catalog from the service. And Ek told Billboard the same thing in May when crediting Spotify's rapid growth to 10 million subscribers to the launch of the free mobile service in six months earlier.

That jibes with Spotify's mobile numbers. According to TechCrunch, Spotify told brand advertisers at CES last week that mobile devices now account for over half of all listening. More specifically, 42 percent of listening comes from smartphones and 10 percent comes from tablets. The remainder comes from the desktop client (45 percent) and the web player (3 percent). (When asked about these figures by Billboard, Spotify neither confirmed nor denied their accuracy.)

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The pieces seem to fit fairly well. If most of Spotify's listening is mobile, but only a quarter of monthly listeners are subscribers, it's reasonable to assume free mobile listening constitutes a sizeable portion of total listening.

This storyline is believable in the United States given smartphone penetration in the country. According to comScore, 178 million Americans, representing 73.6 percent of the mobile market, owned smartphones in the three-month period ending in November.

Perhaps aided by smartphone adoption, subscriber acquisition appears to be gaining speed. It took 46.4 months -- almost four years -- to get from zero to 4 million subscribers, and another 22 months to reach 10 million subscribers. (Calculations use the date Spotify announced these numbers, not the actual dates these mile markers were reached.) About 5.6 months passed before the 12.5-million mark. The 15-million mark was reached roughly two months later.

Another way to look at subscription growth is months per millions of subscribers. At the 4, 10, 12.5 and 15 million mile markers, the number of months needed for each million subscribers has been 11.6, 3.7, 2.3 and 0.8. At the current rate, Spotify is adding about 1.2 million subscribers every month. This deserves a couple asterisks, however. The current rate could be influenced by the holiday season -- gift cards, smartphone purchases -- and may not be sustainable. (In retail and elsewhere, certain periods are exceptional and require a series of numbers to be seasonally adjusted.) The limited-time sale of three months for 99 cents (normally $9.99 per month) undoubtedly goosed subscriptions -- another unsustainable trend. Or, although this is unlikely, some of the most recent 2.5 million subscribers are attributable to the Taylor Swift vs. Spotify controversy and the increased awareness it brought the company. In any case, it's clear the rate at which Spotify is adding subscribers has increased over time.

There's more than mobile devices at play here. One cannot overlook how subscription services have increased their value through a number of tactics. Spotify tries over time to convert free listeners by explaining the advantages of subscribing: mobile caching, on-demand mobile listening and use with a range of in-home stereo equipment, among others. With apps for smartphones and tablets, plus the ability to play on Sonos and other in-home audio systems, subscribers are able to enjoy a level of ubiquity that didn't exist in the past. In other words, the level of value provided to subscribers increases over time, which has probably played an important role in Spotify's accelerated subscriber growth.

The politics of free listening is another matter. Spotify's business model -- use free listening to get paid listening -- has been widely criticized. Many artists and rights holders believe consumers should pay for on-demand listening and say unlimited free listening results in royalties that are too low to sustain their creative efforts. In fact, some subscription services -- Beats Music is one -- rule out free listening altogether.

But the numbers don't lie. Spotify has the most subscribers of any music subscription service and a quickening pace of subscriber acquisition. If the goal is to get people to pay for streaming, free mobile listening appear to be an effective tactic.