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Spotify defended and promoted its free, ad-supported tier, even as nearly 90% of its revenue comes from premium, subscription-based users.
The company wants its services to be available on as many devices--from smart speakers to cars--as possible and to reach as many users as it can. Spotify said the best way to do this is by having an option that’s as cheap as possible, or free in this case. The company did say it was investing “quite a lot” in its free product.
Gustav Soderstrom, Spotify’s head of research and development, said its “freemium” model is the biggest growth driver as it converts users onto its subscription platform, with the free tier being the linchpin of its business. Spotify said it uses its free tier to bring in more users, glean data from them to improve its products and then eventually convert some of them onto its paid tier.
“Something for nothing. It’s the greatest value proposition in the history of the world,” he said. “The more they engage, the more likely they are to decide that pay music is for them,” Mr. Soderstrom added later.
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Source : https://www.wsj.com/livecoverage/spotify-ipo