Spotify's Paid-Subscriber Dilemma - Lyrics May Hold the Key

Spotify Inc SPOT is witnessing a surge in its user base, but its paid subscribers growth lags behind free listeners. 

In response, the music-streaming giant is exploring a move to put lyrics behind its paywall.

Recently, Spotify made headlines by restricting lyrics access to some non-paying users. 

This alteration is currently in the testing phase, TechCrunch cites Spotify PR executive CJ Stanley. 

While Spotify has advocated for its ad-supported free tier, it hasn’t shown much attention to it lately. The last significant update to the free tier was back in 2018.

In its latest earnings report, Spotify announced a 34% increase in monthly users of its ad-supported tier, reaching 343 million. Paying monthly listeners also saw growth, but at a slower rate, up 17% to 220 million.

Despite its popularity, Spotify is not profitable, and its main competitor, Apple Inc AAPL, is the world’s most valuable company. 

Spotify needs to convert more free users into paying subscribers to boost revenue. In Q2 2023, Spotify reported over €2.7 billion in premium (paid-subscriber) revenue, compared to just €404 million in ad-supported revenue during the same period.

Spotify’s other revenue-boosting initiatives in 2023 included hiking the prices for its premium plans in the U.S. and plans to add full-length music videos to its app, intensifying rivalry with Alphabet Inc’s GOOG GOOGL YouTube and ByteDance Ltd’s TikTok. 

Price Action: SPOT shares traded lower by 0.51% at $158.50 premarket on the last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.