Spotify Adds 500,000 New Subscribers

24 Nov, 2011

Spotify, has added about half a million new subscribers in the two months since plugging into Facebook's new entertainment platform.

Wednesday's announcement that the digital music service had reached 2.5m paying subscribers comes after a rocky period for the Anglo-Swedish start-up, with launches in four new European countries offset against a renewed debate about artists' earnings from streaming services.

Subscribers pay £9.99 a month for unlimited access to a library of 15m tracks that can be streamed over the internet for instant listening or downloaded to a portable device such as an iPhone or BlackBerry.

Spotify was one of Facebook's key launch partners for its "open graph" in September. The link enables a real-time feed of users' Spotify listening to be shared with their Facebook friends, allowing it and other media services to tap the strong viral effects of the social network's 800m members.

Alongside Facebook, several other initiatives have helped to boost Spotify's subscriber figures from 1m in March.

Since September Spotify has launched in Denmark, Belgium, Switzerland and Austria, after July's long-awaited US debut to make the service available in 12 countries. Partnerships with telecoms operators including Virgin Media, Telia and KPN, which offer extended trials or discounted subscriptions to their customers as part of a broadband package, are also likely to improve Spotify's conversion rate.

Encouraging a larger portion of its non-paying users, who hear and see advertisements interspersed with their music, to subscribe is vital if Spotify is to become profitable.

Sales increased from £11.32m in 2009 to £63.16m last year – more than two-thirds of which came from subscriptions – but losses widened by 60 per cent to £26.54m. Some smaller artists and labels have pulled their music from Spotify and rival streaming services such as MOG and Rdio after complaining that they receive much smaller payments than traditional methods of purchasing digital downloads.

ST Holdings, a UK-based dance music distributor, pulled music from its 238 small, independent labels from Spotify last week, complaining that music "loses its specialness by its exploitation as a low value/free commodity".

It later updated its position to it was "working with some streaming companies on solutions that work as well for artists as they do consumers". Spotify said: "We have agreements with the four major labels and many thousands of smaller indie labels, and the overwhelming majority of our label partners are thrilled with the revenues we're returning to them ..."

Streaming services also suffered a high-profile snub from Coldplay, the British rock band, which refused to add its best-selling new album Mylo Xyloto to their catalogues.

At the same time, Coldplay struck exclusive promotional deals with Apples iTunes, the world's largest digital music store by sales, and Google's YouTube, whose large and popular collection of music videos is seen as an indirect competitor to Spotify.

Spotify pointed to the sales success of Drake's new album, which is available on streaming services, as evidence that they do not "cannibalise" or undermine traditional purchasing.

Daniel Ek, Spotify's co-founder and chief executive, has long argued that its free service helps to lure people away from illegal music piracy.

Next week, Mr Ek will unveil a "new direction" for the company at a New York press conference.

Speculation has suggested that it may unveil a new video component to the site, perhaps as part of a new app for tablets such as Apple's iPad, and new capabilities for external developers to build new applications on top of Spotify's service.

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