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Business News Digital
Spotify bigs up its freemium service to the ad sector
By Chris Cooke | Published on Thursday 24 September 2015
With freemium streaming services still under pressure from the music industry, as artists, labels, songwriters and publishers continue to criticise the royalties they pay out compared to premium subscription set-ups, one possible solution – other than seeking to shut all the free platforms down – is to try and maximise the ad revenues such music channels bring in: labels and publishers, after all, ultimately have a revenue share arrangement with most streaming companies.
When Spotify first launched, the labels were busy chattering about the potential for the music industry to grab a decent slice of the advertising dollar, which may well be why they agreed to licence the service’s since controversial freemium level in the first place.
For it’s part, in the early days Spotify used to speak about its freemium and premium offers as being complementary services; sure, they’d try to upsell premium via freemium, but the latter would also be a standalone revenue generating business. In more recent years, however, with most ads on Spotify Free seeming to be from either the service itself or one of the company’s label partners, the freemium channel has been much more spun as a marketing tool, a necessary evil to sell more £10 a month subscriptions.
But couldn’t the internet’s freebie music services be paying more money into labels and publishers just by selling more advertising? Or maybe the same amount of ads but at a higher rate? That, of course, requires there to be more demand from the advertising world, which is likely the motivation behind a new study commissioned by Spotify called ‘The New Audio’. It explores how the streaming service’s freemium audience compares to that of traditional radio, in terms of demographics and engagement.
The Europe-focused study by market research types TNS involved over 20,000 consumers in ten countries in May and June this year. One key metric provided is ‘incremental reach’, looking at the consumers brands can reach via Spotify that would not be reached via traditional radio. In the UK, that ‘incremental reach’ is 14% in relation to Heart and Capital, and 15% in relation to Kiss. And among those trendy 15-34 year olds, overall incremental reach is a cool 21%. Good times.
Possibly to boost the research’s credibility, the report does show that the reach and impact of Spotify freemium does vary from country to country – it is less impressive in Germany, for example – though in many markets the TNS stats provide bragging points for the streaming firm. And although the report itself isn’t this explicit, the whole exercise seems to be Spotify saying to brands “see your radio advertising budget, you should chuck some of that our way”.
Or, in the more diplomatic words of the company’s Director of Sales UK David Cooper: “This TNS study aims to help media buyers understand the quantity and quality of the Spotify audience, and the extent to which Spotify can complement and extend a broadcast media buy. By identifying when and where Spotify reaches an audience that does not engage with radio, we hope to improve both media buyers’ understanding of the audio market, and to grow the audio market as a whole”.
Fans of charts can download the report from Spotify’s site for brands.
