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Pandora boss questions whether Spotify freemium can last forever
By Chris Cooke | Published on Friday 30 October 2015
Pandora chief Brain McAndrews has had a little dig at Spotify because, well, why not? If James Blunt can have a little dig at Spotify, why not Brian McAndrews?
It’s been a tricky week for Pandora since announcing its most recent financials, with investors seemingly nervous that customer acquisition is slowing, even though revenues are up. Some on Wall Street seem to think the arrival of Apple Music has had an impact of Pandora’s ability to sign up new users, though McAndrews correctly points out that Spotify – with its fully on-demand freemium level – is more of a competitor than Apple’s streaming set up, which only offers limited free channels beyond the three month free trial.
When speaking to investors about his company’s recent performance, McAndrews admitted that Spotify freemium may attract consumers – and especially younger consumers – away from his personalised radio service. But, Business Insider has noted from McAndews’ most recent musings, he went on to say: “I think some other models like Spotify and others, there are some that have perpetual free alternatives, and that is going to attract some of the younger audience. [But] whether that’s sustainable or not is a very different question”.
With freemium being primarily a loss-leader marketing tool for companies like Spotify – and a costly loss-leader marketing tool at that, which burns up lots of venture capital – McAndrews wonders if his competitors will eventually have to turn off their expensive-to-run fully-on-demand freemium options.
Of course, the boss of loss-making Pandora having a dig at Spotify for its current loss-making growth strategy might seem a bit rich, but he may still have a good point. If and when Spotify becomes a publicly listed company like his, it might change its mind about the value of operating a cash-haemorrhaging freemium strand as a marketing channel. Which would give more-limited-functionality Pandora-type services – which are cheaper to license – an advantage in attracting those consumers less willing to pay.
