Spotify Now Has 3 Million Paid Subscribers

The popular streaming service Spotify announced on Thursday that it has reached a high of about 3 million paid subscribers, an increase from 2.5 million in November.  The number represents about 20 percent of its total listener base, which is a rise from 15 percent last March.  In essence, this currently means that about 15 million people in 13 countries are currently using the service in some form or fashion.

Spotify generally works on what is sometimes called a “freemium” business model.  Right now, users can listen to unlimited ad-supported music free for six months, but after that, the number drops to only 10 hours per month.  The goal of the company is to convert as many of those free users as possibly to paid users.  Depending on access, Spotify generally charges users anywhere between $5 to $10 a month.

The news indicates that the idea of a paid streaming music service may be attractive to some consumers, but when put into the broader spectrum of music listening, the number is quite low and whether it or similar companies will be able to make a significant impact on the fortunes of music labels and recording artists, remains to be seen.  As a point of comparison, the rival provider Rhapsody only has one million subscribers, and other services don’t supply subscriber numbers, leading most to believe their numbers are lower than that.

Spotify’s advancements, offerings, and innovations, chiefly its offering of “unlimited skips” as part of its “station creation” feature (where users create their own “radio stations” with the artists, albums, and songs they like) may give it a better chance than most to earn a significant share of its marketplace.  How large that marketplace may ultimately end up being, however, remains to be seen. Either way, Pandora (NYSE:P) and Sirius XM (NASDAQ:SIRI) are in for a long term war.