Why Spotify might be screwed

Spotify is trying to win back the news cycle after several days of hype surrounding Apple Music. The streaming service is obvious prey for the beast that birthed the digital music era, but it won’t go quietly—not yet, anyway. 

On Wednesday, Spotify reported new user numbers for the first time in months. Last we heard, Spotify was hovering around the 15-million-paid-subscribers mark, with a total of 60 million active users. Now, the company reports passing 20 million paid subscribers and 75 million active users. It took slightly more than a year for Spotify to double its paid subscriber base from 10 million users, a milestone it passed in May 2014.

Back in March 2013, Spotify hovered around six million paid subscribers, suggesting that number might be roughly doubling in growth on an annual basis.

Spotify

No news is good news—unless you’re an app trying to grow your user base, in which case analysts consider any lull between news bursts and subscriber-number reports to be suspicious. The 20 million milestone is noteworthy, but it’s a far cry from the 40 million paid users the company admitted it needed to balance revenue payouts and make its business model work. Renting music from bloodsucking music bigwigs is expensive, as it turns out. Even Apple couldn’t cut a good deal

If Spotify doubles its paid users (the only metric that actually matters) in a year’s time again, 2016 would mean smooth sailing for the only streaming-music service to crack the profitability nut. If Spotify grows steadily and adds another 10 million paid users per year, it would take until 2017 for Spotify to balance royalty payouts with paid-subscriber revenue.

Now that Apple Music is in the mix, Spotify is suddenly a small fish in a big pond, one that might need to retool its model for profitability before Apple swims along and snaps it up. Then again, Apple’s big splash might popularize the idea of paying a monthly fee for all-you-can-stream music access, expanding the pond for everyone. Rather than scaling steadily, Spotify and its competitors might need to scrap the plan and innovate fast in order to stay afloat.

Illustration by Max Fleishman

Taylor Hatmaker

Taylor Hatmaker

Taylor Hatmaker has reported on the tech industry for nearly a decade, covering privacy and government. Most recently, she was the Debug editor of the Daily Dot. Prior to that, she was a staff writer and deputy editor at ReadWrite, a tech and business reporter for Yahoo News, and the senior editor of Tecca. Her editorial interests include censorship, digital activism, LGBTQ issues, and futurist consumer tech.