Music Business

Will Payments Fall As Spotify Tests Unlimited Ad Skips?

skipSpotify continues to look for ways to make its free music tier more appealing both to users and advertisers. To that end, the streamer has begun a test that allows all free users to skip audio and video ads as often as the want and get back to listening to music.

Unlimited ad skipping, currently being tested in Australia, means that users will only have to endure ads for products they care about and advertisers will only pay for plays to interested consumers.

"Our hypothesis is if we can use this to fuel our streaming intelligence, and deliver a more personalized experience and a more engaging audience to our advertisers, it will improve the outcomes that we can deliver for brands," Daniel Lee, Spotify's global head of partner solutions told AdWeek. "Just as we create these personalized experiences like Discover Weekly, and the magic that brings to our consumers, we want to inject that concept into the advertising experience."

Spotify New $Less Revenue, Less Reason To Pay

In the long run, as more ad data is collected on each user, it could mean that Spotify could charge advertisers more for targeted ads that deliver engaged users.  But in the sort run, it could mean less ad revenue as users skip through ads, and that would lead to lower payments to artists and rights holders.

For some free users, ad skipping may offer one less reason to convert to Spotify's paid Premium tier.  That's the exact opposite of what labels were hoping for when they accepted a lower royalty rate from Spotify in exchange for increased efforts to convert free users to paid.

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  1. Clearly, Spotify has plans to make money from yet untapped revenue sources based on the number of subscribers they can acquire through music. But then again that has been their plan all along; i.e. first phase was a highly profitable public offering. Not (ultimately) based on revenue or potential revenue from their existing business model.
    A model that has seriously diluted the ability of musicians and songwriters to make money.

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