Is overall “user engagement” falling for services such as Spotify? Or are the free users simply falling away?

A few independent artists have been releasing data that relate to payments from subscription music services such as Spotify.  Looking at these various reports, and the apparent increase in “per stream” payouts, I am left to wonder:

Is the number of tracks to which any user listens during any month actually falling for services such as Spotify?  In other words, is average “user engagement” (if measured as tracks streamed per month) falling?

Or, are free users simply falling away?

Since privately shared data is, well, private, I can only discuss recent payout data reported publicly by bands such as Uniform Motion.  This group recently reported that their payouts from both Spotify and Deezer increased (in the EU, no doubt).

From Spotify, the payouts increased between 2010 and 2011 from an effective €0.0033 per stream to an effective €0.0047 per stream.  From Deezer, the payouts increased as well, from somewhere in the ballpark of  €0.006 per stream to a somewhat astounding  €0.0127.  Converted to dollars that means the band is receiving greater than $0.60 $0.0074  per stream from Spotify and and astounding $0.0165 from Deezer.

Now, since most of these deals are likely structured on a percentage of per user revenue basis and few users are causing any per stream minima to trigger payments greater than the user subscription fee, I have to wonder how the effective payment per stream is rising.

As Spotify and other services like Deezer incorporated restrictions upon the length of term over which users were provided free access to the services, the number of active monthly users seems to have stalled a bit.  These services are still growing, but at a slower rate.

Furthermore, if you peek at Daily Active Users, as compared to Monthly Active Users of the Spotify Facebook app (thanks to AppData), it seems that daily active users have been rather stable (i.e., no growth) as monthly active users increase.

As the number of free users peeled away, we would expect the effective per stream payout to increase.  Furthermore, since the total number of users is not increasing drastically (any growth being culled by extant free users falling out) it would seem that ad revenues are not on a major upswing.

And so, is this increase in effective payouts a simply function of free user fallout?  Or, are paid users losing interest in the services such that their monthly payments are being divided among a smaller number of monthly plays?

4 thoughts on “Is overall “user engagement” falling for services such as Spotify? Or are the free users simply falling away?”

  1. Dave,

    I think you are seeing the playing out of a well known trend in subscription economics. The early adopters are the heavy consumers and then as progression slides down the adoption curve consumption declines. Eventually you reach a point where “late” adopters do not see value and don’t purchase. ie eventually you will see spotify/deezer ofer lite-plans – perhaps by genre rather than by volume.

    A further complication is the Telco-bundling strategies that Orange are playing with Deezer – they are “giving” the service away for high spending consumers. So they count as a Deezer subscriber and they might be buying the Orange plan for other reasons eg unlimited voice calls.

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    1. Hello Keith. I hope all is well.

      Alternatively, we are seeing the usual pattern experienced by Freemium services being somewhat truncated by “forced retirement.”

      Free users sign up, experience the service for some time, and then retire. The service may actually be compelling, but the price points in the market are too high to convert these free folks.

      In the case of Spotify, the retirement is somewhat forced give the six-month “up or out” policy in place. A number of users who might remain, cannot. And whether these users somehow re-register is up for grabs.

      And so, the “active user” pool unnaturally decreases in size, resulting in a bit of an over statement of the paid conversion rate—unless you look at Registered Users as well.

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  2. ” the band is receiving greater than $0.60 per stream from Spotify and and astounding $0.0165 from Deezer.” … do you mean $0.006 ? I don’t think artists get 60 cents per Spotify stream!

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