Is Spotify Giving Too Much Away For Free?

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Spotify. It’s a mixed bag of supreme convenience and amazing power in the hands of a listener and an absolute frustration to artists across the world, many of whom are still looking for that monetary success in an increasingly streaming focussed industry.

Sure, Spotify does bring a lot of wonderful things to the table. But those things are going to have to have a limit in order for the company to turn itself a profit, right?

For example, I’m an owner and President of an independent record label. I will always biasedly side with artists and their goals to be heard by anyone and everyone. That itself makes Spotify such a wonderful tool, but it can also be an artist’s greatest heartache too. If more of their fans switch to streaming, they in turn will make less profit than if they get their fans to buy their songs the typical way, i.e. via digital and physical mediums.

So this all leads to a troubling result. I do not pay for Spotify. I have before, but after realizing I use Last.fm a lot more, I decided to only pay for that instead. However, I still use Spotify around twice a week or more with a free account, and I think this is an interesting point no one is looking at right now. I can listen to music on Spotify for up to ten hours a month, with no true interruptions, just an occasional 30 second advertisement that I can yawn through. This in my opinion is far too much for a free user. Theoretically, I can use Spotify and all it’s brilliant services without paying them a dime and listen to all the music I can dream of, while just ignoring the random advertisement here and there.

This is a concern to me. This should be a concern to the artists, Spotify, and the music industry as a whole. This whole process has a trickle-down effect that can make cash burning companies like Spotify and cash strapped artists, non-existent.

Spotify severely inhibits its ability to be a profitable company by not setting any sort of limit on the listening capabilities of free users. I’m currently on my sixth song of a list without a single advertisement. How is this a winning formula? There just isn’t enough incentive to make the average listener want to dish out money. Without a value chain build up for the paid services, this will continue to be a weak point for the company. Endless radio on your mobile device just simply isn’t enough…

All of this is even more maddening to me because it allows free users to listen to all the music they can dream of without paying a single penny. So, now you have a potential endless amount of musical listeners obtaining all their music from a free source. Why would they see the need to go buy their artist’s music (other than good moral obligation…) if they can get away with all of this for free right now?

Spotify has limited the ability to generate revenue for itself and artists, and one must ask, how can it justify a single reason to go and ask for more cash investments in the company? There is no logical reason to invest in a company that can’t even come up with a value to make money off it’s own service. On top of that, the company has already burned through $206 million since 2008, not even counting 2013. So really, where is the bottom? Even worse, talks say that investment may come in the form of a loan, instead of an equity investment. Any logical business person will see this land mine from a mile away. Indeed, this is an uphill battle now.

I for one do want Spotify to succeed (finally an ad after the seventh song). It’s a great service that can offer a lot to listeners and artists alike, but it is doing a poor job of it currently. I understand that it can take time to develop a good business model, especially when you have such a neat concept such as theirs, but now is their time. I want Spotify to make me want to pay for it’s service. Until then, I’ll continue to pay for Last.fm and use Spotify sparingly, out of respect to artists.

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