When one thinks about the history of music distribution and consumption over the years it is a fascinating one. For the majority of the history of music the only way that one could hear music was to either have access to some kind of musical instrument (even if that instrument was the voice) or to be physically present for the playing of music. Recorded music came in the form of sheet music that was sold in stores and eventually wax cylinders that contained the beautiful music fans so longed to hear in the privacy of their own home. Skip ahead to the different formats of music and how many times The Beatles discography has been made available (quite a few) and we land on the present moment, where warehouses full of music can sit nicely on a few terabytes of hard drive space.
Along came the music service Spotify which completely turned the music world, as it were, on its head. Now you did not have to own a single disc, cassette, eight track, or even kilobyte of music in order to listen to just about any song you wanted to, wherever you were — you just had to either be in front of a computer and listen to the occasional ad or pay a premium fee of either five or ten dollars per month (less than the cost of the average MP3 album) and get uninterrupted music right to your ears.
Now it comes out that Spotify has been so successful with their free ad supported version that even though it eventually was planning on getting rid of this version, they apparently are not going to do so. It seems that the money they make from advertising to those free customers combined with the money they get from the premium service is more than enough for them.
I think it goes a little bit further. The vast majority of the users are free however they do have a good conversion rate of about twenty percent, according to the article. The more people use the free service and post to their Facebook walls, the more customers they are likely to attract who have a chance of eventually becoming paying customers. If they cut off their free customers and only keep the premium customers they will in effect be taking away a large source of good advertising for them in the form of all of the wall posts that people make — people love to boast about what they’re enjoying at any given moment.
I say keep on with the free model, Spotify — it helps get Chaim Yosef to sleep some nights and we love only having to listen to the occasional ad. Who knows? We may eventually become paying customers.