This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Spotify Cracks Nut on Subscribers, Breaks 10 Million Mark

NEW YORK (TheStreet) -- Spotify announced Wednesday it has passed 10 million paying subscribers globally, an impressive figure that firmly establishes the company as the leader in the streaming music space and brightens the future of the sector generally, loosening its ties to a purely advertising-based model.

Spotify also said it now streams to 40 million active users in more than 56 countries, including subscription and free, ad-driven services. The company in March unveiled its first major redesign for its Web site and app, unifying the new look across platforms, adding some functionality and a new black background and cleaning up its menus and artwork display.

One of the biggest questions for the streaming music sector since its inception has been moving music consumers from a purchase-and-own model to a subscription model. Download, CD and vinyl collectors had to be convinced to take part in this new idea, to pay for subscriptions to a service that would grant them unlimited access to their favorite music.

As a result, offering free listening accompanied by ads has been the bread-and-butter of the space until now. But ad-driven revenue is notoriously unstable, driving services to push harder toward a "freemium" model, where each free service offers a subscription upgrade designed to supply a more predictable income stream.

Must Read: Slips: What Wall Street's Saying

So the elephant-in-the-room question for these services has been: How many subscribers can they get? 

That question matters even more to Spotify at the moment, as the company is rumored to be considering an initial public offering later this year.

Spotify charges $9.99 a month for its premium service after a 30-day free trial, although the company has said about 70% of total revenue goes to rights holders. Assuming half of the subscribers stick around for a full year, that still leaves almost $200 million a year potentially added to net revenue. In addition, the company said that 12 billion hours of music have been streamed since the company was launched in 2008 and more than 5 million playlists are created or updated every day.

Spotify reported revenue of $594 million in fiscal 2012, double the year prior, while reporting a net loss of $80 million, a wider loss than the $62 million reported for 2011.  

U.S. rival Pandora (P - Get Report) views itself as a different animal, putting most of its marketing behind its free, ad-driven streaming radio service. But it nonetheless offers an ad-free subscription upgrade, Pandora One, with some 3.3 million subscribers. In March, the company showed signs of a growing emphasis on subscriptions, raising its fee to $4.99 per month, up from the previous $3.99 and scrapping its $36 annual subscription.

Pandora claims to have 75 million active users.

Like Spotify, the new guy in the space, Beats Electronics' service Beats Music, also charges $9.99 a month. Beats is unusual in that it has placed all its bets on the success of an elite brand of subscription service, with no ad-driven service. The service offers a free trial period for subscribers. A deal with AT&T (T) offers the service free to the phone company's users for a three-month period.

Beats has been rumored to be struggling to attract subscribers, with some leaked estimates ranging from as low as 111,000 households and 500,000 subscribers.

That scenario could serve in Beats favor, however, if a much-discussed buyout of the Dr. Dre-founded company by Apple (AAPL - Get Report) goes through. Apple's struggling iTunes Radio could act as a free service, with Beats as its subscriber upgrade. The marriage has the potential to increase the appeal of both services, even if a marriage threatens to dilute the Apple and Beats brands

The biggest challenge that Spotify's rivals in the space face, however, is competing internationally. Spotify was founded in Sweden and launched in several European countries at once. It's expansion onto multiple continents is continuing with a significant push into African markets on the horizon.

You Don't Know What Your Kids Are Listening To

How Netflix Intends to Take Over the World

-- Written by Carlton Wilkinson in New York

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.01 -1.20%
P $9.17 5.60%
FB $117.47 0.03%
GOOG $696.29 0.57%
TSLA $222.10 -4.40%


Chart of I:DJI
DOW 17,639.02 -111.89 -0.63%
S&P 500 2,049.89 -13.48 -0.65%
NASDAQ 4,724.1240 -39.10 -0.82%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs