Business Matters: Spotify Subscriptions Spike As Free Access Is Limited
Business Matters: Spotify Subscriptions Spike As Free Access Is Limited

Spotify's Increased Subscriptions = Limiting Free Access
-- Spotify lost 1.6 million weekly active free users but gained 520,000 paying subscribers in the four-month period during which it implemented limits on free users, according to a report at MusicAlly. The details, from a report prepared for rights holders seen by MusicAlly, covers the seven Western Europe markets in which Spotify operated at the time. The service launched in the US in July.

Here are the numbers as reported by MusicAlly. In March, Spotify had 4.73 million weekly active free users and 1.02 paying subscribers. Restrictions on free users were implemented May 1. By June, Spotify had 3.13 million active free users - a decline of 34% -- and 1.54 million paying subscribers, a 51% improvement. Spotify would have gained subscribers over that period regardless, but the sharp improvement strongly suggests many consumers chose to pay for the service when faced with the limitations.

Astute observers will note some discrepancies in the numbers. First, Spotify has long touted ten million users. That figure most likely applies to only registered users, not active users. Second, Spotify had 4.67 million weekly active users in June, according to the report. That number is lower than the 5.7 million free users implied in statements by CEO Daniel Ek. In March, Ek said Spotify had 1 million subscribers who represented 15% of the active user base. That works out to about 6.7 million active users, over 1 million more than given in the report to rights holders. But as MusicAlly explains, the difference arises because Ek was using the actively monthly user metric, which would be higher than an average weekly metric (because a site tends to get more users over a one-month period than it does over a one-week period within that month).

The company's decision to scale back free listening is widely believed to have been to secure the involvement of rights holders for the July launch in the U.S. Free users are now limited to 10 hours per month and can listen to any one song up to five times. Those same limitations will be in place in the U.S. after a six-month period in which free users get unlimited access.

Embedded in these numbers is a debate about how freemium services must balance two goals: attracting subscribers and reducing piracy. There's an obvious trade-off in losing 1.6 million low-value customers and gaining 520,000 high-value customers. But there are between roughly 1.1 and 1.6 million people no longer listening to music legally at Spotify (depending on how many free users became paying customers as a result of the limits). Rights holders have reason to rejoice that 520,000 consumers made the decision to spend money on a subscription (or acquire a subscription through a promotion). At the same time, over 1 million consumers lost contact with a music service that is widely regarded as the leading legal alternative to piracy. Or they just might not be listening to any music - hardly the goal of any artist, label or publisher. Rights holders - and they certainly understand this - can't have it both ways with freemium models. If they want to convert people into paying customers, they will have to accept fewer overall users.
( MusicAlly)


ReverbNation Acquires Gigmaven

-- Online show booking service Gigmaven has been acquired by ReverbNation for an undisclosed sum. The deal adds to ReverbNation's suite of tools and will enhance ReverbNation's Venue Profile app for Facebook. New York City-based Gigmaven was founded in 2008 and had been privately funded, according to its web site. It allows artists to find venues, apply for and book gigs, and promote themselves with an electronic press kit.

Madonna Uses Smirnoff To Find World's Best Dancer
-- Madonna has partnered with Smirnoff to use the next Smirnoff Nightlife Exchange Project to find the best dancer in the world for her next tour. Fans can enter the contest through October 10 by submitting a 60-second video at www.smirnoff.com. The Smirnoff Nightlife Exchange Project, including the exclusive dance competition, is the first component of a multi-faceted agreement between Madonna and her partner Live Nation and Diageo, the parent company of Smirnoff.
( Press release)


Passing Grade: Inside Facebook Rates Outside Lands Social Media Strategy:

-- The Inside Facebook blog has a good critique of the social media strategy of the Outside Lands Music Festival in San Francisco from August 12 to 14. The event organizers received high marks for integrating Facebook "like" buttons (a pretty basic marketing tactic these days) and using it to their advantage when posting updates about participating artists, ticket giveaways and news items. The organizers also worked with Sonic Living to develop an RSVP app that attracted nearly 6,000 active users.

But Inside Facebook spotted what it considered a major flaw in how Outside Lands used Facebook Places. Because it did not add the event to the Facebook Page or Event, users had to create their own unofficial Places. As a result, the festival received about 7,000 check-ins scattered across 40 unofficial Places. Thus, Facebook users who "liked" unofficial Places were not lending promotional support to the festival.

Overall, Inside Facebook thought Outside Lands did a good job and will be rewarded in the future. "These efforts will pay off next year when it comes time to market the fifth edition of the festival, as more people will have heard of Outside Lands and receive updates about it in their news feed."
( Inside Facebook)