Did Spotify Just Shoot Itself in the Foot with its New Free Offering?

Earlier today Spotify announced that it would be changing its policy of requiring a $10/month subscription to get access to listen to music on your mobile device, instead now opting for a policy that lets users listen to songs on Spotify for free (no subscription required) on tablets and smartphones.  There’s still somewhat of a catch though.

Tablets will get the same experience as a desktop/laptop computer, you can listen to (pretty much) any song you want on Spotify for free with some ads sprinkled in, however, smartphone users will only be able to take advantage of a “shuffle” feature (also with ads sprinkled in).  The Spotify Shuffle feature on smartphones is similar to an experience you would find on Pandora, however, it gives users more control over what they hear, you can choose a specific artist, album, or playlist to listen to.  As our very own Brian Rubin pointed out earlier, “Pandora’s main function is providing listeners with other artists and songs in the same vein, while Spotify Shuffle will apparently give you just music by the artist you’re looking for.”

But here’s the problem, is this new free offering from Spotify too good?  And will it hurt the company long term?  Obviously, the ultimate goal is still to convert free users into paid users because that’s actually where the company makes most of its revenue (paying customers, not ad revenue).  Going back to our Brian Rubin, he said that he’s still not prepared to pull the trigger and buy a paid subscription — and clearly, Spotify needs people to pull that trigger for long term success.

I get that getting people to try out the service is the only way to start them down that funnel which will hopefully lead to a purchase.  I also get that as more people trade-in traditional computers for tablets, Spotify needs to be available to new users on the device they are most likely to use it with.  I get all that.  But before this change people had a very real reason to buy a subscription and now I’m not as convinced.

I just opened Spotify on my iPhone and started playing some music, I skipped some tracks and listened to a few complete songs before I was even presented with one ad.  The ad took about 30 seconds and the music started again.  It’s no big deal.  One thing Spotify offers with its paid subscription is higher quality audio (a higher bitrate), I have to say, the quality of the audio that I heard is most likely sufficient for most people.  In fact, it sounds very good, even with high-end headphones, which makes me confident that people using Apple EarPods or similar headphones will not notice the difference in the audio.  The only thing about the free smartphone version that is somewhat annoying is the limit on the amount of songs you can skip.

At the event in New York City this morning, Daniel Ek (CEO of Spotify) noted that the more hours users log on Spotify, the more likely they are to convert into subscribers.  That may have been true before because their entire “music life” existed on Spotify and if they wanted to take that on-the-go they needed to subscribe for $10/month.  Can that case still be made?  I’m not sure.

What do you think?  Will this move do more harm than good for Spotify?