Last week, Spotify made a big splash by launching an unexpected new feature. The company made Spotify Radio, a Pandora-style Internet radio service formerly for the desktop, available to mobile devices as well. Spotify Radio is notable not just because it’s available on iOS, or because it could pose a challenge to Pandora. The big deal is that it’s free – and that could generate big revenue for Spotify.
This is a smart move for Spotify, which previously offered functional mobile apps only to paying subscribers. Mobile access to the company’s all-you-can-stream music library still requires a $10-per-month subscription, but the free mobile radio offering inches millions of users closer toward paying up.
The difference between streaming music on the desktop and on mobile devices is a significant one. The ability to take music anywhere is a huge boon to consumers. That’s why it’s the chief selling point of premium subscriptions on services such as Spotify, MOG and Rdio. Paying users not only skip the ads, they can take an enormous library with them in the car, on a jog, to a party or just about anywhere they go.
With Spotify Radio for mobile devices, the company liberates its nonpaying customers from the desktop and gives them a taste of what the mobile service is like. Naturally, it has limitations: Songs are broken up by audio ads, and tracks can’t be played on demand. It costs $10 per month to free oneself from those particular shackles. To make the paid service even more alluring, Spotify offers users a 48-hour trial period of its premium subscription.
If the strategy is meant to drive more users into the service’s mobile experience, it appears to be working. Spotify has been the fifth most popular free app on iTunes for several days, beating out Instagram. And a radio-enhanced update to the Android app is expected within weeks.
Streaming Music’s Precarious Future
This comes at a critical time for Spotify, which has been available in the United States for roughly one year. The European music subscription service is seen by many as one potential way forward for a long-beleaguered music industry, but its future success is by no means guaranteed. The company pays exorbitant licensing fees to record labels, some of whom are skeptical about the viability of the business model employed by streaming music services. Some independent labels and big-name artists have opted to keep their material off of Spotify and similar services over concerns about royalty payments.
Spotify makes money from advertisements directed at nonpaying users, but ultimately its success hinges on its ability to convert those people to paying subscribers. Earlier this year, the company hit 3 million subscriptions, driven in part by its U.S. launch and subsequent integration with Facebook.
More recent numbers haven’t been made available, but if the company’s strategy pans out, efforts like this will help boost paid sign-ups even further.
Spotify Radio is available as part of the service’s existing iOS app. For now, the feature is available only in the United States.
