Spotify is testing a less expensive, ad-supported subscription tier – Spotify Plus. For $0.99 a month, Spotify subscribers get access to the same music they love, but with fewer limitations than the free, fully ad-supported tier. For example, in the new, cheaper tier, subscribers have unlimited skips and on-demand listening, reports The Verge. In the free version, users can only skip six songs per hour, and they can only choose songs from 15 curated playlists or listened to a shuffled mix of music.
In Spotify Plus, subscribers will still see ads, but they have more control over the music they listen to. They can choose their own songs rather than listening to songs from albums or playlists.
Spotify Plus is in its early testing stages, and The Verge says the company is testing different offers and price points. Free listeners who receive this offer can log into their accounts to accept the offer, but Spotify asks them not to share the offer with unauthorized users.
“We’re always working to enhance the Spotify experience and we routinely conduct tests to inform our decisions. We’re currently conducting a test of an ad-supported subscription plan with a limited number of our users,” a spokesperson said. “Some tests end up paving the way for new offerings or enhancements while others may only provide learnings. We don’t have any additional information to share at this time.”
Spotify will use the information learned from their testing to determine how to move forward. They could choose not to offer Spotify Plus at all, or they could launch it with different pricing and features.
Business strategy
Spotify’s premium subscription service is available for $9.99 a month per listener. The streaming service also offers different plans for duos ($12.99 a month), families ($15.99 a month) and students ($4.99 a month). Offering another tier would give the company something that no other streaming service (e.g., Apple Music, Amazon Music, Pandora, etc.) has. This would allow the service’s current tier of free listeners more control over their music while also asking them to put some skin in the game ($0.99 per month) for the privilege.
At the same time, Spotify will continue to show them ads and earn some incremental recurring revenue. If 1 million listeners signed up for $12 a year, that’s $12 million in exchange for a few perks.
This new tier would also help Spotify showcase some of the benefits of a premium subscriber and could convert some of the free and Spotify Plus listeners into full-fledged subscribers at $9.99 a month. This is a simple way for Spotify to up the ante a little. As the company’s subscriber base grows with Spotify Plus, it could attract more advertisers too.
Insider Take
We love this idea, and we love that Spotify is always innovating and experimenting! While they are among the top streaming audio services, their investments in podcasting and improving the user experience will help the company attract and retain subscribers and, eventually, the streaming audio company will become profitable. For the second quarter of 2021, Spotify reported a 23% increase in revenue and subscriber growth greater than the company’s guidance. However, they also reported a net loss of €(20) million, or $(0.19) diluted earnings per share. With the right mix of ad-supported and premium subscription options, and a growing slate of popular podcasts, Spotify can overcome such losses. Spotify Plus is one tool that could help get them there.
