When Apple first launched Apple Music, one of the biggest reasons to switch over to them was their $15 family plan. But then Spotify came along and copied them. Maybe this was actually stealing the feature? Whatever you call it, it’s paying off in a very big way. This price point on the family plan has helped Spotify acquire another 8 million paying subscribers during the second quarter of 2018. That takes its total number to 83 million worldwide. Those numbers are insane!
This continued growth is really good news for Spotify, who had filed to go public earlier this year. They’re under increased scrutiny of the marketplace as shareholders continue to expect strong growth, and, even some profits. Apple Music, we should point out, announced in May that they had passed the 40 million subscriber mark. Some are suggesting that Apple could be on track to surpass Spotify by the end of the year, but I’m not convinced.
Another reason for Spotify’s growth could be thanks to more customers in Latin America as well as other emerging markets. Even though these numbers are great, Spotify’s investors aren’t quite sure what to make of these results. Their stocks fell by 5.6% in premarket trading, due in part to slowing growth of the free service. Spotify reported fewer users of the advertising-supported tier than last quarter. But does that make a difference? Don’t you want fewer people using the advertising-supported tier? Because then they’re using the paid tier and supporting the service monthly.
Once investors realized what I just said, the stock rebounded and as of Thursday morning, the stocks have rebounded and are trading up 1.5% to $190.88. (Which, if we’re keeping track is slightly ahead of Facebook at the moment). Paid subscribers account for about 90% of the company’s sales. The whole idea of paid versus unpaid service does make you scratch your head a bit, doesn’t it? I mean, you would think that you would want more paid customers than those using the free service. But Spotify says otherwise. The advertising-supported free service is still incredibly vital for bringing in new customers and fueling that overall growth.
What I think will keep Spotify growing is it’s investment in non-music programming, like podcasts, and what they’re doing to help artists operate independently. Which means, they can get their music out there for people to enjoy without really having to go through the crummy music industry process. Great news for independent artists who haven’t been around for a while, but bad news for those who didn’t get these kinds of breaks. Overall, Spotify brings us a different kind of service, doesn’t it? I’m not saying that it’s not unlike others. Or that it doesn’t “borrow” ideas from others in the industry, but there’s something about Spotify that sets it apart from others. I hate to use the phrase “je ne sais quoi”, but that’s kind of what it is. Maybe it just feels cooler than Apple Music? Maybe it has a sleeker design? Regardless, they are growing, albeit slowly, but that doesn’t mean they won’t make progress.