Spotify’s progress: challenging Rhapsody but freemium gap growing

Spotify co-founder Daniel Ek threw down the gauntlet to rivals incuding Rhapsody as he announced first U.S. customer numbers in an event on Thursday. The music service has passed one million paid subscribers in the country since launching there a year ago, Ek said, adding:

“We believe this makes us the biggest subscription service here but also the fastest-growing one. We accomplished in one year what it took others a decade to do.”

That was a slap in the face to decade-old Rhapsody, whose last subscriber disclosure was around a million. The company told paidContent it would not yet update that number.

  • Over 5 million paying customers.
  • 20 million active users.
  • Added 1 million more paid customers in the last 3 months.
  • Over 1 billion playlists.
  • Playlist count has more than doubled in the last year.
  • Adding 10,000 to 20,000 new songs every single day.
  • Spotify Apps: 1m streams from One Direction app in its first week.
  • “Spotify pays back nearly 70% of all the money we get in to rightsholders.”
  • “We’ve now paid out more than $500 million and it’s more than doubled in the last nine months.”

Spotify is clearly growing fast now. But, when you chart growth in its respective user types, you can see that the number of free, ad-supported streams it is having to serve relative to paid customers is widening…

[dataset id=”723582″]

Active-user growth of 33 percent in the last year is versus paid subscriber growth of 25 percent.

rhapsody songmatchThat means, as it develops, the service is having to attract more freeloaders proportionate to paying customers.

Whilst Spotify gives limited free non-mobile access to non-payers, Rhapsody requires payment from the outset; no freebies there. Currently, it has a half-price offer for subscribers’ first three months, but everyone has to cough up a credit card number from the get-go.

No wonder Spotify is growing faster than Rhapsody has. Free brings bees to the honey pot. But which service will prove more sustainable in the long run?