Spotify Explores Pushing Lyrics Behind Paywall
The Challenge of Spotify’s Paid-Subscriber Growth
Spotify’s user base is growing faster than ever, but its paid-subscriber growth isn’t keeping pace with free listeners. That may be why it’s exploring pushing lyrics behind the paywall.
Locking Down Lyrics for Non-Paying Users
Over the past few days, the music-streaming company made waves by locking down lyrics for some of its non-paying users. For those select free-tier listeners, Spotify displays a message that reads: “Enjoy lyrics on Spotify Premium.”
A Limited Test
This change is only a test, according to Spotify PR executive CJ Stanley. The company is currently testing this with a limited number of users in a pair of markets. More information about the test has not been shared.
A Lack of Attention to the Free Tier
But it’s no secret. Sure, Spotify has gone to bat for its free-with-advertising tier, claiming (amid a spat with Taylor Swift) that its freemium model is the future of the music industry. Yet, Spotify hasn’t given its free tier much love in recent years. By our count, its last big overhaul was in 2018.
Growth Disparity between Free and Paying Listeners
With its most recent earnings report, Spotify told investors that monthly users of its ad-supported tier had rocketed up 34% over the last year to 343 million. The company’s paying monthly listeners also grew during that period, but to a lesser degree — up 17% to 220 million.
The Need to Convince Free Users to Pay
That’s still growth, but Spotify is not profitable, and its chief competitor (Apple) is the most-valued company in the world. Spotify remains more popular than Apple Music, yet clearly the company needs to convince more of its free users to pay up. Even as Spotify invests in ad-related products and adds some freebies, the proof is in its revenue; Spotify reported more than €2.7 billion in premium (aka paid-subscriber) revenue in Q2 2023, and just €404 million in ad-supported revenue during the same period.
The Future of the No-Free-Lyrics Test
Will this no-free-lyrics test stick around? Stanley declined to share more details on whether the change would become permanent. The company seems to be performing a temperature check by limiting the scope of the test, and in any case, free lyrics are still pretty easy to find online.
Stock Performance and Outlook
Spotify’s stock price is nowhere near its all-time highs, when the stock traded north of $300 per share in early 2021. However, the firm has seen its share price tick back up this year. The stock closed today near $160 per share — up by more than 94% from the start of 2023.
