behind closed doors

3 Reasons Why Apple Won’t Be Able to Get Rid of Your Spotify ‘Freemium’ Subscription

Photo: Spotify

This week in the wonderful and ever-changing world of streaming music, The Verge reports that Apple is trying to get rid of the free version of Spotify by engaging in some high-level backroom dealings. Eliminating Spotify’s “freemium” option would be a convenient development for the tech giant, as Apple’s much-talked-about Beats Music relaunch, expected to happen as early as June, won’t include a free tier for users. At first blush, it seems like a great idea — we should pay for artists’ work — but it’s also unlikely to happen. Here are three reasons why:

You can’t defeat the internet.
Steve Albini pointed out, no matter how many times we’ve tried to put restrictions on the content that lives online, the internet has found a way to buck those restrictions. Anything that goes on the web is subject to being shared and/or stolen, especially music. The “freemium” option on Spotify that allows people to listen to whatever music they want in between very annoying ads accounts for 80 percent of Spotify’s subscribers. These people obviously have a very high tolerance for pain, but Spotify hopes to convert them into users who are willing, not forced, to buy music. (The company maintains a conversion rate of about 25 percent.) Eliminating the freemium option will not guarantee that these listeners opt in to paying for a service, but it will guarantee a host of them find other sources to listen to music for free on the internet — including piracy and YouTube.

The department of justice doesn’t like it.
According to the Verge report, in addition to allegedly trying to persuade record companies not to renew their licenses with Spotify in order to strong-arm the company into getting rid of its free tier, Apple has also offered to pay YouTube’s music licensing fee to Universal Music Group if UMG agrees to pull its music from the video-streaming site. If these allegations are true, Apple may be in violation of anti-trade laws — territory the company is all too familiar with. The claims have put the DOJ and the Federal Trade Commission on high alert. An insider says they’re already investigating potential wrongdoing.

Apple doesn’t need the money.
The big three record labels — Universal, Warner, and Sony — own part of Spotify. These labels have a vested interest in keeping it afloat, and Spotify will do anything to keep them happy, like reportedly giving Universal a whopping
$1 billion to renew its licensing agreement. Apple has been lagging on streaming music, and restoring the influence it had on the music business during the apex of iTunes downloads will not be easy. What’s more, none of this matters much to Apple’s bottom line. “Whether or not Beats is a success, it would make just a small dent in Apple’s overall business […] if Apple’s streaming music service were to make as much money as, say, Pandora, which generates roughly $1 billion in revenue a year, that amount would be only slightly more than half of 1 percent of Apple’s annual $183 billion in revenue,” reports the New York Times. No music streaming service has yet earned a profit; Apple’s real focus is on establishing a new platform to sell physical products and figuring out a way to revive iTunes. Getting rid of your “free” Spotify subscription would be very unpopular collateral damage.

So calm down, “freemium” users: You can still spend your $10 a month on booze and coffee instead of ad-free music streaming. And if you’re looking for yet another bargain, Jack White is currently offering a Tidal coupon — er, promotion — for Third Man Vault members …

3 Reasons Why Apple Won’t Ruin Free Spotify