Music streaming service Spotify has hit the 100 million user mark as it continues to grow amidst tough competition from rival services including Apple Music, Pandora, Rhapsody and Google Music.
About 30 million of Spotify’s users are actually paying for the services using premium accounts, with the rest still using free ad-supported accounts, according to a June 20 story by Reuters. Those 30 million paying subscribers are the most of any music streaming company, the story reported. Spotify had an operating loss of $209 million in 2015.
The 100 million subscriber mark is significant for the company because it will give it the scale it requires to now work on establishing its profitability, Richard Windsor, an analyst at Edison Investment Research, said in a statement provided to eWEEK.
“The first 100 million users are the key threshold when an ecosystem will gain critical mass,” wrote Windsor. “For an ecosystem relying solely on advertising, this is the point at which it will begin to cover the costs of its investments. This threshold can be lower if the ecosystem or network service in question has other forms of monetization such as subscription or on demand services.”
In addition, he wrote the 100 million user mark is significant “because this is the point at which the balance of power between it and the record labels begins to shift. Spotify has to pay away 70 percent of the revenues that it makes to the record labels and this is the single biggest reason why the company is still losing money.”
Now that it has secured a significant and large user base, Spotify will have more power to negotiate more money for itself as opposed to paying it out to music companies and artists, wrote Windsor.
“Spotify is rapidly reaching the point at which the record labels will need Spotify more than Spotify needs the labels,” he wrote. “At that point, negotiations with the labels will have a very different tone and this is when gross margins will begin to improve.”
In May, Spotify dropped the price of its Spotify Family Plan premium music-streaming services to $14.99 for up to six family members, saving a family of six about $20 per month over its former rates. The music-streaming company unveiled its lower prices to replace its old pricing structure of $9.99 for the first user and $5 each for each additional user for family members. The new Spotify Family Plan rate puts the service on par with Apple Music, which charges $9.99 for one user or $14.99 for up for six family members.
The streaming music marketplace has been a busy place in recent months. Earlier in June, music-streaming service Rhapsody, which bought the assets of Napster back in 2011 and uses the Napster name elsewhere around the world, announced that it will soon be changing its name to Napster in the United States. The change, which will not affect users’ playlists, favorites, albums and artist selections, is being made to enable the company to use the Napster name in the United States as it does in all other non-U.S. markets as it forms one global brand. Rhapsody/Napster is also going through a restructuring that is bringing about layoffs of an undisclosed number of employees around the world.
Rhapsody offers a three-month trial for $1 and then charges $9.99 a month for its paid ad-free music-streaming services. The company offers more than 35 million songs to subscribers.
Also earlier in June, Apple announced an all-new user interface for its year-old Apple Music streaming service as it works to address user complaints about its original design. The Apple Music changes include an all-new design that Apple expects will be easier for users to navigate as they search for music. The Library, For You, Browse and Radio tabs inside Apple Music have been redesigned for ease of use, while a new Search tab has been added to make it easier to find music. Also new is the addition of visible lyrics when listening in Apple Music. The changes are aimed at helping Apple further increase the user base of its Apple Music subscription service, which now has 15 million users.
Apple Music was launched in June 2015 as the company dove into the growing streaming-music market with a $9.99-a-month service that aimed to take on established competitors, such as Spotify, Rhapsody and Pandora. A family membership for up to six users is $14.99 a month. About 10 million users signed up in the first six months, but the service didn’t grow as much as Apple had expected.