Spotify has over 71 million paying subscribers but about two million people are accessing its premium service for free, as on March 21, 2018.
Spotify has over 71 million paying subscribers but about two million people are accessing its premium service for free, as on March 21, 2018. These users have been dodging its advertisements without making the payment. The risk of artificial manipulation of stream counts and failure to effectively manage and re-mediate such fraudulent streams could have an adverse impact on its business, operating results and financial condition.
The company’s SEC filing said, “Unauthorised access to our service may cause us to misstate key performance indicators, which once discovered, corrected and disclosed, could undermine investor confidence in the integrity of our key performance indicators, and could cause our stock price to drop significantly.”
The filing further stated that its ad-supported service serves as a funnel, driving more than 60% of its total gross added premium subscribers since it began tracking this data in February, 2014. “With a 51% increase in revenue from our ad-supported service from 2015 to 2016 and a 41% increase in revenue from our ad-supported service from 2016 to 2017, we believe our ad-supported service is a strong and viable standalone product with considerable long-term opportunity for growth in ad-supported users and revenue,” said the filing.
It currently faces intense competition in growing both its ad-supported users and premium subscribers. Various streaming services, including Apple, Amazon and Google have developed and are continuing to develop devices for which their music streaming service is preloaded, which also put Spotify in a tight spot. It has started cracking down on fake accounts earlier this month and has been sending such users messages about evading ads or having their accounts shut down.
By Ananya Saha