Revenue Model
Spotify principally operates under a so-called 'Freemium' model, which is offering simple and basic services free for the user to try and more advanced or additional features at a premium offer; however this is augmented by income from music purchases within the player. It offers a US$10 per month unlimited subscription, close to the Open Music Model (OMM) estimated economic equilibrium for the recording industry. However, the incorporation of DRM diverges from the OMM, as well as from competitors such as iTunes and Amazon MP3, which have dropped DRM. In Denmark for example, it's DKK50 = US$ 8.70 per month (as of 24 March 2013) unlimited subscription.
In February 2009, the advertisements for non-paying users were reported as lasting 15 seconds though in May 2009, Neowin reported that the approximate length has increased to 30 seconds. The interval between advertisements is not constant.
A payment of a monthly fee removes advertisements, removes streaming limits and increases the bitrate to 320 kbit/s in some songs. It also allows usage of mobile clients for iOS, Android, Symbian, webOS, Windows Mobile 6.x, Windows Phone and most BlackBerry devices (though currently in a limited beta release). On 2 December 2009, Spotify launched "Premium ecards" (premium codes), which upgrade an account to "Premium" status for 1, 3, 6 or 12 months.
In March 2009, Spotify began to offer music downloads at £0.99 per track in partnership with the 7digital music store. This feature was moved from a context menu to an explicit "Buy" link in mid-October 2009. For those users who buy large numbers of tracks, one can buy download packages which allow you to pay up front then download a number of tracks within a month. These packages are, of course, cheaper than buying individual tracks, and thus for those who buy this volume of music, this option is usually cheaper than any other download store.
In May 2010, Spotify introduced "Unlimited", which allows one month of unlimited, advert-free playback for half the price of Premium; however, it does not include any of Premium's other special features.
In October 2010, Wired reported that Spotify is making more money for labels in Sweden than any other retailer, "online or off".
During 2010, Spotify paid more than €45 million to its licensors.
In March 2011, Spotify announced that it had one million paying subscribers across Europe, and by September the number of paying subscribers had doubled to two million. In August 2012 Time reported that Spotify had four million paying subscribers, earning them at least €20 million per month in revenue.
According to About.com, independent musicians can easily distribute their music to Spotify; pay for paid downloads is $0.70 USD, pay for streamed songs is on a sliding scale basis determined by the total number of monthly plays an artist receives.
In a report released in 2012, it stated that Spotify posted a net loss of $59 million in 2011, ascribed to increased staff costs and licensing fees and royalties to record companies.
In a report published in November 2012, Spotify was anticipated to reach revenues of $500 million over the course of 2012, up from $244 million in 2011.
Spotify announced on 6 December 2012 that it had more than five million paying customers globally, including 1 million in the US Spotify also announced that it had over 20 million active users worldwide.
By March 2013, Spotify had grown to six million paying customers globally and 24 million total active users.
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