Just one week after its less-than-conventional IPO, Spotify (NYSE: SPOT) is planning a new version of the free tier of its streaming music service, reports Bloomberg. While Spotify will not make an official announcement with details until April 24, sources told Bloomberg that the new version will make the service easier for Spotify’s mobile users, giving them more control over which songs they hear on top playlists, similar to the company’s premium tier.
However, users of the ad-supported, free streaming music service will still have slightly limited access. They cannot listen to all the songs in Spotify’s music library like paid users can, though they can hear most songs and top playlists with Spotify’s shuffle feature, says Bloomberg.
Spotify estimates total users at the end of the first quarter of 2018 to be 169.5 million. Of those, 74.5 million were paying subscribers, and 95.0 million were free users. By comparison, Apple Music has 40 million paying subscribers, according to Investor’s Business Daily, and Pandora had 5.48 million paying subscribers to its Pandora Plus and Pandora Premium plans, and 74.7 million total active listeners at the end of 2017.
In unrelated news, yesterday Spotify and Hulu announced they are partnering on a joint subscription called Spotify Premium with Hulu. After an initial three-month trial for $0.99, subscribers will pay $12.99 for both services which includes Spotify Premium, normally priced at $9.99 a month, and Hulu’s limited commercial plan, normally priced at $7.99 a month. Subscribers who take advantage of the special offer will save about $5 a month.
This special deal is only open to Spotify Premium members who pay Spotify directly for their service, not a third-party payee. Current Hulu subscribers are eligible only if they switch their billing to Spotify. The offer expires May 10, 2018. With this special offer, subscribers cannot upgrade to Hulu’s no commercial or live TV plans or have any Hulu premium add-ons like HBO or Showtime. This is similar to the Spotify and Hulu streaming entertainment bundle offered to students for $4.99 a month last fall.
Spotify’s IPO went live as a direct listing on the New York Stock Exchange on Monday, April 2. According to CNBC, Spotify began trading at 12:30 p.m. EDT that day at $165.90 a share, putting the company’s value at about $29 billion. As of 7:59 p.m. EDT yesterday, Spotify’s stock had risen in value to $149.57.
Billboard reports the U.S. music market experienced double-digit revenue growth in 2017, hitting $8.72 billion. Of that total, streaming revenue represented 65 percent of the total, coming in at $5.66 billion. Spotify was among the streaming music companies named that contributed significantly to that revenue. At the same time, streaming music companies are struggling to find a viable business model, mixing ad-supported models with subscriptions to help cover their high overhead which includes rising royalties. For Spotify to maintain its competitive edge, it needs to leverage partnerships like the one with Hulu, and it needs to continuously improve its product and differentiate itself.