Spotify Raises Over Half a Billion — and New Subscriber Numbers Show Freemium May Be Working
With strong user numbers and a large funding round, Spotify today shows that other services have a long way to go before they catch up.
Spotify has reached 20 million subscribers and 75 million monthly listeners globally, the company announced Wednesday. This latest threshold comes five months after the company announced it surpassed 15 million subscribers and 13 months after the 10 million- subscriber mark.
The new numbers arrived two days after Apple introduced its Apple Music subscription service. Apple plans to launch Apple Music in over 100 countries on June 30. Spotify is available in 58 countries.
Spotify has also added to its financial war chest, closing a funding round of $526 million on Tuesday that values the company at $8.53 billion. Details of the deal were reported by 80 percent of new subscribers come from the free service. Spotify has now paid out $3 billion to rights holders, with $300 million paid in the first quarter alone.
The latest subscriber and user counts suggest Spotify’s freemium model may have gained some traction since late 2014. Previously released numbers have — with incredible consistency — had a 25-percent ratio of subscribers to total active users: 5 million subscribers and 20 million active users, 10 million subscribers and 40 million active users, and 15 million subscribers and 60 million active users. Had Spotify maintained that ratio, it would have 80 million rather than 75 million active users. What was a 25-percent ratio is now a 26.7-percent ratio.
The new numbers show subscriber growth rate (33.3 percent) exceeded the growth rate of free listeners (25 percent). This fits with the theoretical underpinning of Spotify’s freemium business model: some free listeners will, over time, become subscribers and pass along more royalties for rights holders. Over time a successful freemium model will exhibit improved conversion rates — as seen with Spotify’s numbers. Whether or not Spotify’s slight improvement placates its critics remains to be seen.