Spotify has roughly 80 million active monthly users, 20 million of whom pay and 60 million of whom enjoy the music for free and listen to ads. The company has always maintained that all of its users would have access to the same catalog of music. Now The Wall Street Journal is reporting that Spotify will test a new approach, allowing artists to withhold certain albums from free users.
Earlier this year, Spotify had a very public spat with Taylor Swift, who eventually pulled her catalog. She was unhappy with the amount Spotify paid per stream. The company pays far more for streams from paid subscribers than it does from streams going to ad-supported users. Mega-stars like Swift and Adele believe they can make more money by staying off streaming services at first and selling their music as CDs and downloads instead. Today's report says Swift asked Spotify to make her album available only to paid subscribers, and decided to pull her catalog entirely when they refused.
The danger for Spotify is that all musicians may want to use this approach, hoping to entice their biggest fans into paying for their music when it's released, rather than waiting a week or two to stream it. If that music ends up trickling out to other services users can access for free, like YouTube, Spotify could lose the portion of the market that prefers not to pay for music. Of course, artists and labels are likely to bring the same set of demands to YouTube if they get concessions from Spotify.
This could level the playing field with Apple and Pandora
Losing the biggest new music in its free tier would also give Spotify less of an advantage over services like Apple Music and the upcoming on-demand streaming service from Pandora, which plan to offer the same catalog as Spotify but don't intend to offer a free, ad-supported option for on-demand listening.
UPDATE: Spotify sent along the following comment:
"We are 100 percent committed to our model because we believe that a free, ad-supported tier combined with a more robust premium tier is the best way to deliver music to fans, create value for artists and songwriters, and grow the industry. In that context, we explored a wide range of promotional options for the new Coldplay album and ultimately decided, together with management, that Coldplay and its fans would best be served with the full album on both free and premium this Friday."