Music industry’s revenue has a bigger part of Spotify’s contribution in it. One cannot ignore Spotify when talking about online music streaming. Spotify has attracted millions of subscribers by its free service and then pay for their favourite music. Though Spotify hasn’t covered many countries, Spotify business model has been succeeded in comparison of many other online music streaming applications.

Spotify was launched with a freemium business model which meant that all the basic services were free but you could get some premium services by paying a certain amount every month.  Anyone can stream music for free on Spotify but the premium subscribers can enjoy ad-free, high-quality uninterrupted music streaming with options to download music for offline times. Users can make, edit & share their playlists by connecting it to other social media platforms. The standard rates for a monthly premium subscription is $9.99 with reduced rates of $4.99 for students.

To add to their miseries, they faced massive criticism for underpaying the artists. The concept was to pay artists based on their popularity. The more their tracks were played, more money they were due to be paid, unlike the popular model of paying a fix upfront sum regardless of the success or failure of the track. Spotify mainly deals with the rights holders, which are music companies. 70% of their revenue goes to paying the music companies, who further pay the artists based on their individual contracts with them. This led to a massive backlash among many popular artists. 

Prior to the IPO, Spotify had limited options to make money. They launched sponsored playlists & other sponsored content to its users. Spotify offers a wide range of advertisement types to other businesses. The popular ad categories are branded movements, sponsored playlists & sessions, video takeovers, audio display, overlay, homepage takeovers, branded playlists & pages for advertisements. These were clickable ads that would redirect users to the source website of the advertiser. 

Another game changer for Spotify was their family plan. Subscribers can add 5 more members to their premium accounts. The two conditions were that the members must be living on the same address & they should meet the age requirements as per Spotify’s terms & conditions. You can invite people to join your family plan or you can join someone else’s. The family plan costs $14.99 per month for 6 users including one master user which is responsible for making the payments & editing the cluster & 5 family members.

If you are attracted to the facts and figures of Spotify and also want to start a similar Website like Spotify then take a look at a customizable ready-to-go Spotify clone script for your start-up.

 

Compared to $9.99 per month for a single user, this was a huge relief. The idea was to include as many people as possible to the Spotify family. Trade analyst predicted a drop in total revenue with this move. Spotify is one of their filings admitted that the introduction of family & student plans have led to a slight dip in the average revenue per user (premium).