Spotify discount subscriptions - Spotify respond. Sort of.

22 October 2009

Yesterday we revealed some users of Spotify had received invites to subscribe to their Premium Service at a heavily discounted rate. The offer was presented as a promotion in conjunction with Swiftcover. We highlighted the promotion because it doesn't make a lick of sense - offering discount subscriptions so early in a product's life only serves to devalue it, and potentially upsets those loyal early adopters who are paying full price.

We then discovered from Bitterwallet readers that Spotify were offering different users different amounts of discount - anywhere from 10 per cent to a whopping 50 per cent off for six months, seemingly without rhyme or reason:

Bitterwallet - Spotify discount Premium subscriptions

The biggest mystery is the level at which the client Swiftcover is exposed to users. It isn't. Beyond the initial email which barely mentions Swiftcover in passing (the email doesn't even feature their logo, nor is their name even hyper-linked to their site), the client has nothing to do with the promotion; they're not mentioned again when you click through the link, and since Spotify Premium promises an ad-free experience, what exactly are Swiftcover getting for their money?

We decided to ask Spotify four reasonably straight forward questions about the activity:

  • how have registered users been chosen to be eligible for this promotion?
  • why is there such a huge discrepancy in the discounts offered - between 10% and 50%?
  • is there a concern that Premium users who have recently subscribed will stop subscribing?
  • is Spotify using this activity to test different price points for its Premium service?

We weren't expecting a straight forward answer to the last question, but a reasonably adept PR person could have seen off the first three with ease. Questions from the media about promotional activity shouldn't come as a surprise, especially for a company as high profile as Spotify. And yet:

Hi Paul,

We run a variety of different promotions with various partners and this is an example of one of them that has a Swiftcover sponsorship.

best,

Andres Sehr
Spotify

Wow. Spotify aren't prepared to explain anything concerning this promotion. No detail whatsoever, not even an attempt to point out the benefits to basic users, nothing. In fact we're quite taken back by this circular statement of non-substance.

The basic principle of any client-sponsored promotion is that the client benefits from direct exposure to potential customers; beyond two mentions in an email, Swiftcover gain nothing from this activity. They can't possibly be underwriting the subscription discounts to the tune of tens of thousands of pounds, because they're getting nothing back. If they're receiving airtime in return, then this promotional activity becomes nothing more than added value - Swiftcover are receiving a trickle of extra awareness on the back of a promotion Spotify were intending to run. You don't charge a client for advertising and then run a loss-leading promotion for them out of kindness.

So are Spotify testing the waters to see what subscription rate is most appealing to users? Are they trying to convert a percentage of the massive number of basic users to the Premium service to pump up their revenue? Either is a far more plausible explanation of Spotify's motives than this diluted shambles of a client-led promotion, though the end result is the same - none of this looks good for Spotify, and it does nothing to increase the perceived value of the service to new customers.

TOPICS:   Insurance

37 comments

  • Tom
    I'm canceling my subscription. Should have known where music labels are involved 'Don't be evil' won't work ;)
  • Adam
    What's evil about giving new users a discount for a few months? This is a strategy that's been used for years - "Sign up and get X free/off". Would still love to get one of 4.99 codes. :)
  • Lumoruk
    Their actual response "you're from bitter who?"
  • Paul S.
    I'd agree Adam - discounts aren't new, and they're not particularly evil. The issue is the spread of discounts available, and he fact Spotify seem to be dressing them up into something they're not. It's not a promotion, because Swiftcover aren't particularly benefiting. If it's a sponsorship, then that means the activity is product-led, not client-led, which suggests Spotify are deliberately testing users out with a range of discounts. And if that's the case, it's not a very healthy sign for a young start-up.
  • JB
    The answer by Tom is the kind of answer a blog like this wants. An overly negative article with so many words saying not much at all will surely attract such stupidity. Yes, it's early days. Yes, Spotify experiments. Yes, sometimes it may work, sometimes not. I will soon pay for another premium year - full price. Why? Because the service is the best there is and still has a huge potential to become even better. I'm just happy to see more users get a chance to try Spotify premium, even at a discount.
  • Paul S.
    JB, you've missed the point of the article. I'm not criticising the service - in fact, we've been big supporters of Spotify since it launched. I'm asking whether Spotify are potentially testing a new price point for the Premium service, because this simply isn't a client promotion. If they are, then why? Music labels are heavily involved in the finances of Spotify and while a lower price point will widen their userbase it lower their yield - the cost of providing the service won't drop proportionally in relation to the price paid by users. What happens to the business plan? This is significant.
  • Martin
    What are you stoned or stupid? First off, you cant expect answers from an organisationto such loaded qustions - especially when asked by 'consumer forum' site. How could they answer any of these questions without sh*tting on their doorstep? Secondly, their response did answer the question. This promotion is sponsored by Swiftcover, meaning that (I assume) it is designed to attract customers to use Swiftcover Insurance. In return for this incetive, Swiftcover will be subsidising the premium. Infact, I would go as far as to say that it would be in Swiftcover (and Spotifys) interest for existing Spotify customers to cancel their subscription and go take out a policy with Swiftcover to benefit from the offer,as this would prove Spotifys business model and make it a better investment opportunity for customers. Realistically, a saving over a 10 month insurance policy of £3 per month on their subsidised Spotify account would be £30.30, but that is very valuable business to Swiftcover, and may be enough to convince customers on the fence about which policy provider to choose to go with Swiftcover. Maybe i's not, but thats for prospective insruance customers to decide. Either way, existing Spotify customers do have the choice - go and get Swiftcover insurance and save £30.30 over the year or shop around for cheaper insurance. Some consumers may not be in the market for car insurance, but goodforthem as they are not shelling out £500 per year (like I am)... in the long run, this may have reaching benefits too - imaging if this is successful and Spotify are approached to co-brand with other suppliers / markets (like LoveFilm powering Odeon Rentals) this can only promote competition and drive prices down. In the meantime, keep paying your £10, or go without.
  • Martin
    RE above - I've possibly misread this. If takeup of the offer isn't linked to insurance acceptance, then ignore my comments.
  • Adam
    Paul - if they lower their price by £1-2 and get 20x more users is that not good for the business? Personally I think they launched with too high a price so finding a lower price would attract a lot more users like myself which is good for overall revenues not bad. I don't agree that a cut in price is necessarily a bad sign.
  • Paul N.
    @Martin: It's not linked to insurance acceptance. The only thing it seems Swiftcover gets is the mention they are in this promotion. I think it's pretty obvious they are testing different fees and the conversion and using Swiftcover as a... cover. If it was a straight up promotion it would be flat rate discount to everyone instead of lots of different levels.
  • Paul S.
    One of us is either stoned or stupid Martin, but I'm not sure it's me. The first two questions certainly weren't loaded in any way, and the third could have been answered in a straight forward manner. If this promotion is designed to attract customers to Swiftcover, I'm not sure how. If you can show how this is possibly going to benefit Swiftcover in any way other than minimal name awareness, be my guest. The promotional email contained no links, no logos - nothing except two mentions of Swiftcover in plain text - you couldn't even click-through to the Swiftcover site. If Swiftcover was underwriting this, there's no opportunity for campaign analysis. "...it would be in Swiftcover (and Spotifys) interest for existing Spotify customers to cancel their subscription and go take out a policy with Swiftcover to benefit from the offer..." You don't have to take out a policy with Swiftcover to benefit from the offer. That's the whole point. Swiftcover effectively have nothing whatsoever to do with this activity. They don't benefit in any way. So what's the point of this promotion, exactly?
  • Paul S.
    Adam, I think it's a massive concern because of the way it all works. Whether a user pays £10 per month or £1 a month, the cost of serving audio to the user is the same; it doesn't cost 10x less. Royalty payments to record labels are the same, server costs are the same, and so on. As I mentioned in another comment, record labels are involved in the finances of Spotify. It's been reported that they're paying royalties to record labels, but they're also a share of the revenue too. Increasing the userbase with cut-price subscriptions will increase their revenue, but Spotify will make less money per user. The more users Spotify has, the higher their costs and the more money they have to pay out in revenue share - it's a double whammy. They can't afford to give the service away. it's quite possible all of this is part of the master plan, but mucking about with pricing barely a year after launch is a concern.
  • chrisg.
    Been a subscriber for a while. Not prepared to pay full whack whilst people previously disinterested get it offered for a fiver.
  • Adam
    Paul - I think your wrong. Right now I pay £0 to Spotify and use it everyday. Yes, they get money from advertisements I listen to but do you think it's more than £6-7 per month? It's probably much lower. So me signing up is a gain for them and any price higher then what they get for ads.
  • TVDBP
    I'm a subscriber, mainly just to try the iphone app, though ive had it a couple of months now. I'll be cancelling - they are taking the piss frankly. £10 is a rip off and now its clear they know full well it is. Fuck em.
  • Ed
    Free £4.99 code for the first taker - I'm not using it: U2Yn83RwMz Go to https://www.spotify.com/en/products/premium/order/account/ and enter it under Premium Code. Hope it helps someone!
  • nintendolinky
    Just used thanks.
  • Benzini
    Someone told me Spotify was a free music service. Is that not the case, then?
  • Lew
    awww, ed is a nice guy i like you ed, you've made the world a slightly better place
  • emasu
    Or perhaps Swiftcover were bargaining on the world of blogs and consumerism to pick the quirks up, and give them far wider reaching advertising potential and mentions across the globe? Who knows. Probably not Swiftcover.
    • Andy D.
      I've just signed up to Spotify using a Swiftcover code. It's wall-to-wall Iggy Pop. Nothing else.
  • Graham
    I'm off to start my own consumer blog so I can fill it with petulant wank about PR people not taking my calls.
  • Paul S.
    1.45am. You've been told not to drink on a school night, Graham.
  • The B.
    I've no idea without seeing the T&C's but I used to develop direct marketing systems and know how the fuckers tend to work, I'd guess that anyone clicking the link has just allowed the "sponsor" access to their data and possibly signed up to allowing the "sponsor" to flog that data to 3rd parties, it's actually very lucrative, you'd be suprised the amoutn of money made through buying and selling data lists.
  • ElBuc
    Have you asked Swiftcover?
  • Jay
    Never received an email and I've been signed up scine day one. Shame really as I would have deffo signed up at £4.99!!!
  • Lee
    Talk about Mountain out of a mole hill. If Spotify get 10x as many users out of this, their costs aren't going to be 10x. Where would the costs come from? I'm sure they currently have all the servers etc in place already and are going to be fine with paying the royalties. Besides, this is a 6 month scheme is it not? Their costs per premiumuser are probably below the 10p mark. And as more people start to use the basic spotify, I bet their advertising revenue goes through the roof. Lastly, I can't see too much wrong with swiftcover being attached? I can't imagine they're paying the difference, it's probably a mutual agreement for free advertising or something similar. Good grief.
  • lutin
    @Lee "I can’t imagine they’re paying the difference, it’s probably a mutual agreement for free advertising or something similar." Wow, thanks for that Lee!
  • golly
    It's better for Spotify to have more users as it uses p2p, take the customers ££ and their bandwidth.
  • Lee
    @lutin Sorry for stating the obvious, but obviously some people can't see it!
  • chay
    I had an email the title of which was "Get Spotify Premium for only 6.49" The first line of the actual email said "Get Spotify Premium for only 4.99" The button then said "Buy for £6.49! I wish they would make their minds up
  • Spotify B.
    [...] at the moment; in the UK they’re busy experimenting with the price of the Premium service under the wafer-thin guise of a client promotion. Meanwhile in their native Sweden, they’ve just launched their first ever television [...]
  • Andrew R.
    Obvious troll is obvious!
  • chris
    Maybe they're just measuring the response rates of different offers to find a balance between uptake and cost. Nothing new here, companies do it all the time. But it's good, looks like the 9.99 offer has reached saturation and they want to sign up more people. I'd definitely join for 4.99 a month
  • Josh
    I'd also join for £5 a month. But not so sure about £10.
  • spotify s.
    I've been browsing on-line more than 3 hours as of late, but I never found any attention-grabbing article like yours. It is beautiful price enough for me. In my opinion, if all web owners and bloggers made good content material as you probably did, the internet will be a lot more helpful than ever before.
  • premium c.
    Rather fantastic write-up. I located your blog as well as desired to point out that I definitely beloved surfing around your own web site blogposts. No matter the reason I'm going to be subscribing to the feed with this particular hoping you write once more shortly!

What do you think?

Connect with Facebook, Twitter, or just enter your email to sign in and comment.

Your comment