14 DAY TRIAL // Spotify now has 250,000 paying subscribers in the US alone according to a recent report. That's quite a lot of people since Spotify only launched in the country a few months back. But the company is going to have to convince a lot more people before it all starts to pay off.
Say what you will about Spotify's move to team up with Facebook, but it really had no choice if the company was ever going to succeed.
Spotify is the most popular on-demand, music streaming service around and it's got the most paying customers too.
Yet the company is still losing money and will continue to do so for a while to come.
The problem is, no surprise for those that follow the issue, with the music labels which, even though they are shareholders in Spotify, demand huge licensing fees for the music they provide.
Spotify gives all the money it makes to the labels and it's still not enough, it's been losing money since launch. Thankfully, it has deep pocketed investors.
Spotify has become so popular thanks to one thing in particular, free music. Granted, the free music option got a bit cut down this year, but Spotify has gone back and is now offering a decent free option, albeit only for six months.
This has enabled the site to get millions of users. The problem is, advertising is never going to pay for the bills, so Spotify needs to turn those users into paying customers.
In fact, getting more users is a double-edged sword. On the one hand, what online service wouldn't want a bigger audience. Plus, the more users it has, the more are going to start paying.
But, on the other hand, Spotify is paying a lot of money for the music it provides. And for each play, it pays the music labels, meaning that the more users it has, the more it has to pay.
The key here is to convert users into paying customers. So far, it's been going well and Spotify seems to be doing better in this department, but it needs to convince the influx of new users that came from Facebook to start paying as well.