Spotify, the music streaming service, announced it will allow anyone on an Android or iOS device to use its app free of charge, starting immediately. The service lets listeners pick and choose songs, and is hoping the move will expand its user base.
The company also announced that it’s adding 20 new countries to its roster. Spotify will now reach 55 global markets. Spotify currently has about 24 million active users and 6 million paying subscribers. Its competitor Pandora has about 72 million active listeners.
Derek Thompson, business editor for The Atlantic, discusses the implications with Here & Now’s Meghna Chakrabarti.
MEGHNA CHAKRABARTI, HOST:
From NPR and WBUR Boston, I'm Meghna Chakrabarti. It's HERE AND NOW.
Spotify, the music streaming service, has announced that starting today it will offer its mobile app for free. That's big news for the music industry and music lovers. To find out why, let's turn to Derek Thompson, business editor at The Atlantic. Hi there, Derek.
DEREK THOMPSON: Hi. Good to be here.
CHAKRABARTI: Great to have you. So first of all, let's just remind listeners what is Spotify, how does it work, and then what these new changes mean?
THOMPSON: Right. Spotify is a music streaming company. You can log on in your desktop and listen to just about whatever song you can think of for free, or you can pay $10 a month for that and take that quasi-infinite library with you on your smartphone. You know, one way I think of this is that, you know, what if you woke up one day and realized that you suddenly owned every single song on iTunes. With Spotify, you sort of do. You can do these songs, take them off line and listen to them whenever you like.
The changes now allow anyone on a smartphone or tablet to use this app for free. But there's a catch. You can't just select individual songs to play. That would require a different sort of music license. Instead, users can access playlists and albums, but they have to scroll through these lists through a shuffle-play button. So you can't quite pick the exact song you want to play, but you can sort of get close. And it's like this because of the licensing rights that make it more expensive to pick and choose songs individually.
CHAKRABARTI: Right. So the shuffle was the compromise that Spotify had to make there.
CHAKRABARTI: So let me ask you - but what does this mean for Spotify as a business? What's its real aim here in basically un-tethering its mobile app from a subscription service?
THOMPSON: Two things. First, just growth. Spotify has about 24 million active users, 6 million paying subscribers. Pandora, the radio station online, has triple the amount. It has 72 million active listeners. At the same time, you know, you had Apple breathing down its neck. They have iTunes radio. You have Google, which has its own music service. Spotify needs to grow. The other thing, I think, is, you know, to get people to use Spotify on their phones, the company wants to upsell them. It wants them to start using their service, realize how wonderful it is and then say, you know what, I guess I'll just go ahead and pay the full $10 for Spotify premium anyway.
At the end of the day, this is a company that doesn't make money. Their earnings are negative. And the way to get from negative to positive is to get some of your subscribers to pay more money. So I think that the long-term strategy is exactly that.
CHAKRABARTI: Right. Ken Parks, Spotify's chief content officer, said in an interview that the first task is to get them or consumers on the conveyor belt. Two words, paid consumption.
CHAKRABARTI: But let me ask you, Derek, what does this mean for the music industry, for the labels? Because it seems to me as yet another confirmation that they're taking steps forwards to, believing or realizing that free music services don't necessarily take a bite into people, you know, buying actual songs.
THOMPSON: Right. You know, it's interesting. For a long time, you know, sort of chapter one in terms of music and the Internet was basically just people stealing music, right? The idea was that Napster, YouTube, that these things destroy the music industry. And, indeed, music profits just absolutely were devastated. What we're now finding is, you know, the empire sort of strikes back. We've built now professional, grown-ups services to listen to music, and these services are making deals with these studios.
And so music is learning again exactly how to make money through all of these people listening to music all day long. Because, you know, one thing that I think is important to remember is the ability of tablets and smartphones to elongate the amount of time they will listen to music is absolutely extraordinary. And music's beginning to realize, OK, we can make money off of this by making the right sort of licensing deals with the right companies.
CHAKRABARTI: Derek Thompson, he's The Atlantic's business editor and joins us on Thursdays. Thank you so much, Derek.
THOMPSON: Thank you.
CHAKRABARTI: You're listening to HERE AND NOW. Transcript provided by NPR, Copyright NPR.