All-important percentage of Spotify paid vs. free users keeps falling
Spotify added 26 million users in the first three months of 2023, hitting a record 515 million active monthly users. Paid subscribers grew by 5 million to 210 million.
Both are impressive numbers, but the ratio of paid to free subscribers is falling steadily. This matters because ad-supported free streaming pays artists and labels far less than paid streaming.
In Q1 2019, 46% of Spotify’s overall user base paid to stream. That fell to 45% in Q1 2020, 44% in Q1 2021, and 43% in Q1 last year. In Q1 2023, just 40% of Spotify users were paid Premiim subscribers.
Financially that meant that in Q1, 60% of users represented $361 million in ad revenue vs. the 40% that generated almost $2.96 billion in paid subscription revenue.
Some of this year’s drop could be users worried about the economy shifting to the robust free service from Sporitfy Preium of a more expensive Apple Music, Amazon Music Premium, or TIDAL account.
But the overall year-on-year trend has to be troubling for Spotify and its label partners.
MORE: Spotify reports solid growth as monthly users top 515M, margins improve
Bruce Houghton is the Founder and Editor of Hypebot and MusicThinkTank, a Senior Advisor at Bandsintown, President of the Skyline Artists Agency, and a professor for the Berklee College Of Music.