The nice thing about raising $250 million is that it lets you offer your customers services that few competitors can match. Spotify, which is riding high after completing a massive fundraising round in November, said today that it has dropped all limits on streaming ad-supported music on the web. Previously, Spotify limited you to a certain number of hours a month after a 6-month trial period. As of today, the company has totally removed the caps, in a move that has implications for competitors like Beats Music and Rdio.
Spotify's free offerings have always been more generous than its peers
The move comes less than a week before the high-profile launch of Beats, which is challenging Spotify with an enormous marketing campaign that includes promotional deals with AT&T and Ellen DeGeneres and is expected to include an advertisement that airs during the Super Bowl. Unlike Spotify, Beats will launch without a free tier after a 7-day trial, making it harder for them to attract casual users and then convert them to paying customers. Pandora dropped its own streaming limits for free users last year.
Most companies that use a so-called "freemium" model report that the longer a person uses their service, the more likely they are to pay for that service at some point. That's one reason that Spotify has millions more users than any other on-demand music streaming service: its free offerings have always been significantly more generous than its peers. Eliminating the caps on free listening will cost the company more money in the short run — but it may also help the company pull away from its competition even faster.