Spotify is experiencing rapid growth in its user base, but its paid subscribers are not increasing at the same rate as free listeners. This has led the company to consider putting lyrics behind a paywall.
In recent days, Spotify has made headlines by restricting access to lyrics for some of its non-paying users. For a select group of free-tier listeners, Spotify now displays a message that says, “Enjoy lyrics on Spotify Premium.”
Spotify’s PR executive, CJ Stanley, clarified that this change is currently in the testing phase and is being tried out with a limited number of users in specific markets. However, the company has not provided further details about the reasons behind this test.
While Spotify has defended its ad-supported free tier in the past, it has not made significant updates to it in recent years, with the last major overhaul dating back to 2018.
According to Spotify’s recent earnings report, the number of monthly users on its ad-supported tier has surged by 34% in the past year, reaching 343 million. In contrast, the number of paying monthly listeners grew by 17% to 220 million during the same period.
Despite its popularity, Spotify is not yet profitable, and its main competitor, Apple, holds the title of the world’s most valuable company. To improve its financial position, Spotify needs to convert more free users into paying subscribers. Although the company is investing in ad-related products and offering some freebies, its revenue statistics reveal the challenge it faces. In Q2 2023, Spotify reported over €2.7 billion in premium (paid subscriber) revenue but just €404 million in ad-supported revenue.
As for whether the test involving restricted lyrics for free users will become a permanent change, Stanley did not provide further information. Spotify appears to be gauging user reactions by limiting the scope of the test. In any case, free lyrics are readily available online.
While Spotify’s stock price is far from its all-time highs, which saw it trading above $300 per share in early 2021, the company has seen a resurgence in its share price this year. It closed today at nearly $160 per share, marking a more than 94% increase from the beginning of 2023.
