Spotify runs $99 annual subscription promo to challenge Apple Music

Posted:
in iPhone
Spotify on Friday launched a promotion offering 12 months of Premium streaming for $99 -- a little over $20 less than the music service would normally cost going month-to-month.




The sale expires on Dec. 31, and is available only to people starting or extending an individual plan. It also can't be paid for through gift cards or prepaid cards, which limits its potential as a holiday present.

It may nevertheless prove a competitive weapon against services like Pandora and Apple Music. The latter has been offering $99 annual subscriptions since last year, though only by diving into subscription settings or buying a gift card.

Typically an Apple Music subscription costs $9.99 per month -- the same as Spotify's monthly fee.

Spotify is also currently selling three months of Premium for $9.99, though not to anyone who canceled a subscription after Oct. 20. Premium users get ad-free listening, offline caching, and access to higher-quality streams.

Comments

  • Reply 1 of 17
    airnerdairnerd Posts: 486member
    Spotify is a nonstarter for me unless they get a standalone Watch app.  
    hmurchisonjahbladewatto_cobra
  • Reply 2 of 17
    lkrupplkrupp Posts: 5,805member
    Spotify is an excellent service, that I’ll grant you. But Spotify is a one trick pony that will not be able to withstand the onslaught of Apple, Google, Amazon, and other behemoths that can play the low margins game until Spotify is asphyxiated by lack of oxygen in their profits. Royalty payments will rise, the margins will get thinner and thinner. Eventually Spotify will succumb to a buyout and be absorbed by somebody. I hope they have a strategy for this coming reckoning. 
    racerhomiejahbladejd_in_sbLordeHawkpaisleydiscojony0badmonkwatto_cobra
  • Reply 3 of 17
    linkmanlinkman Posts: 751member
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    mike1lkruppbadmonkwatto_cobra
  • Reply 4 of 17
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    hmurchisonrandominternetpersonjdgazgenovellewatto_cobra
  • Reply 5 of 17
    We will sell individual subscriptions at a loss and make it up in volume

    Edit: Never mind, already said.
    edited December 2017 watto_cobra
  • Reply 6 of 17
    boltsfan17boltsfan17 Posts: 1,843member
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    Amazon is losing money on Prime, but you have to remember, they are making a ton of money selling things. Amazon also makes billions with their web services division. Their web services division alone more than compensates Amazon's losses for Prime. 
    jahbladeGeorgeBMac1STnTENDERBITSairnerd
  • Reply 7 of 17
    macxpressmacxpress Posts: 4,077member
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    Amazon is losing money on Prime, but you have to remember, they are making a ton of money selling things. Amazon also makes billions with their web services division. Their web services division alone more than compensates Amazon's losses for Prime. 
    Amazon is like Apple and as it stands right now, and can afford to lose on the x, y, z service because they have other services to make up for it. Spotify however does not. As far as I know, its just funded by investors and I think its only a matter of time before they start losing investors as they'll start seeing this isn't a wise investment. They'll have to come up with some kind of exit strategy. 
    watto_cobra
  • Reply 8 of 17
    hmurchisonhmurchison Posts: 12,114member
    Apple's going to tie in their video ambitions along with Apple music.    Spotify is going to have to ante up 
    or get left behind. 


    watto_cobra
  • Reply 9 of 17
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    Amazon is losing money on Prime, but you have to remember, they are making a ton of money selling things. Amazon also makes billions with their web services division. Their web services division alone more than compensates Amazon's losses for Prime. 
    Yeah, I forgot to mention AWS.  But the rest of Amazon seems to be the anchor holding AWS down:

    AWS remains the profit engine for Amazon, which has always operated on thin e-commerce margins. While AWS accounted for 10 percent of Amazon's total revenue in the quarter, the unit generated operating income of $1.17 billion, while the company as a whole had operating profit of just $347 million.” -  From CNBC

    But that’s what I mean.  If most of their income is from AWS when does it stop making sense to be operating everything else at a loss or barely above break even?  Why add more “free” stuff to Prime when that isn’t where their money comes from?  And AWS is certainly a much different business than selling to consumers.  I imagine there aren’t many Amazon customers who are even aware of AWS, let alone put money toward it (directly).  By that I mean, if Amazon decided to close it’s retail doors and just keep AWS going would that even have any effect on AWS?  I doubt it.  It’s something like a conglomerate.  If one company that makes pens in one division and saw blades in another and window coverings in another, completely exits the market for one division it would have little effect on the others.  So if one of those is losing so much money that it’s dragging the rest down why keep it?

    And, as has already been mentioned, how can Spotify last when they’re competing against companies that don’t need to show a profit in streaming?  I don’t use Spotify so I can’t answer this, but, is Spotify’s service/app/interface/everything so much better than the other competitors that they could keep their users (or enough users) to raise their prices to a point where they actually earn money?
    edited December 2017 randominternetpersonwatto_cobra
  • Reply 10 of 17
    Spotify is toast.
    They are in deep financial trouble.

    watto_cobra
  • Reply 11 of 17
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    Wall Street says Amazon is basically being carried by AWS. I know it doesn't make any sense to me but I'm probably just stupid. I'm sure Amazon will eventually have a higher market cap than Apple does. With a P/E of nearly 300, how can it not pass Apple in overall value? Amazon, like Tesla, doesn't need to make profits. Amazon is already considered a perfectly run company and considered to be run far better than Apple. Amazon goes against the grain of anything I learned about investing but the big investors continue to plow huge amounts of money into Amazon due to the belief Amazon will put every other retailer out of business with no interference from the Feds. Amazon is beating the crap out of Apple in share gains over the last five years and will likely continue to do so for the next five years. Amazon may lose money but Wall Street says Amazon is losing money to gain dominating market share percentage so that's perfectly acceptable. Apple is just the opposite. Apple is always chasing more profit in order to lose market share percentage. Weird, huh? To big investors, $30 Echo Dots are worth more than $1000 iPhones or $350 AppleWatches. Again, it's that market share percentage thing.

    Back to Spotify. I sure don't see how Spotify can cut prices because it only has that one business, unlike Amazon with multiple businesses. At least Spotify is only offering a price cut for a short time to try to attract more subscribers. I hope it works out for them. Maybe they intend to raise prices down the road. Streaming content businesses are never very profitable, if at all. Apple could crush a lot of streaming businesses if it really wanted to. Apple's got billions of dollars they can afford to lose. However, even as an Apple shareholder, I don't want to see Apple trying to drive other companies out of business just on a whim. I'm not that greedy. I definitely want Spotify to survive and I'm sure Apple isn't concerned about Spotify ruining their streaming business.

    Don't try to figure out why big investors prefer certain stocks over others. They probably see some bigger picture due to insatiable greed. The FANG stocks all have huge market share percentage, so they're seen as far more valuable than Apple. That's just the way it is. If Apple uses its repatriated overseas cash to full advantage, Apple could blow any of the FANG stocks away. Apple won't do that. They'll stay conservative to the very end and Amazon will eventually overtake Apple in value.  Now that Jeff Bezos has the taste of unimaginable wealth, there will be no stopping him from becoming the wealthiest man on the planet.  Wall Street will back him all the way.
    edited December 2017 jasenj1
  • Reply 12 of 17
    jordexjjordexj Posts: 3unconfirmed, member
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    Amazon is like a lot of other companies.  They appear to lose money because they take a loss in shipping costs, but Amazon just produces an accounting vehicle that takes those losses and hide them in other areas where they are making a profit.  It is like the same idea with Bait/switch.   

    Now with Spotify; I can only imagine that they are making some sort of profit by re-negotiating the royalties that they are paying the musicians on the backside.   Or they are writing off the discount as a marketing charge.  
  • Reply 13 of 17
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    Amazon is losing money on Prime, but you have to remember, they are making a ton of money selling things. Amazon also makes billions with their web services division. Their web services division alone more than compensates Amazon's losses for Prime. 
    Yeah, I forgot to mention AWS.  But the rest of Amazon seems to be the anchor holding AWS down:

    ”AWS remains the profit engine for Amazon, which has always operated on thin e-commerce margins. While AWS accounted for 10 percent of Amazon's total revenue in the quarter, the unit generated operating income of $1.17 billion, while the company as a whole had operating profit of just $347 million.” -  From CNBC

    But that’s what I mean.  If most of their income is from AWS when does it stop making sense to be operating everything else at a loss or barely above break even?  Why add more “free” stuff to Prime when that isn’t where their money comes from?  And AWS is certainly a much different business than selling to consumers.  I imagine there aren’t many Amazon customers who are even aware of AWS, let alone put money toward it (directly).  By that I mean, if Amazon decided to close it’s retail doors and just keep AWS going would that even have any effect on AWS?  I doubt it.  It’s something like a conglomerate.  If one company that makes pens in one division and saw blades in another and window coverings in another, completely exits the market for one division it would have little effect on the others.  So if one of those is losing so much money that it’s dragging the rest down why keep it?

    And, as has already been mentioned, how can Spotify last when they’re competing against companies that don’t need to show a profit in streaming?  I don’t use Spotify so I can’t answer this, but, is Spotify’s service/app/interface/everything so much better than the other competitors that they could keep their users (or enough users) to raise their prices to a point where they actually earn money?
    I don't believe the rest of Amazon outside of AWS is holding them down. They are making money off their Whole Foods purchase as well. Prime is a big driver in retail sales for Amazon. People with Prime tend to spend much more money on Amazon compared to people without Prime. I think Amazon will continue to push Prime in the foreseeable future. As long as AWS is making a ton of money, that will continue to allow Amazon to fuel the rest of its other businesses such as purchasing Whole Foods, retail, etc. I'm sure the majority of people have no clue about AWS, but are using it every day. I doubt people realize Netflix is using AWS. Funny thing is, Spotify is using AWS as well. 

    I don't see how Spotify can continue in the long term. I think eventually someone will buy them out. The writing is on the wall. I use Spotify and like it a lot. The apps are great and I prefer it over Apple Music. I really like the artist playlists feature on Spotify. Apple Music has nothing like that as far as I'm aware. Another reason why I prefer Spotify is Apple Music match is a disaster. Both trials of Apple Music for me destroyed my iTunes library. 
  • Reply 14 of 17
    jd_in_sbjd_in_sb Posts: 1,466member
    lkrupp said:
    Spotify is an excellent service, that I’ll grant you. But Spotify is a one trick pony that will not be able to withstand the onslaught of Apple, Google, Amazon, and other behemoths that can play the low margins game until Spotify is asphyxiated by lack of oxygen in their profits. Royalty payments will rise, the margins will get thinner and thinner. Eventually Spotify will succumb to a buyout and be absorbed by somebody. I hope they have a strategy for this coming reckoning. 
    Excellent analysis 
  • Reply 15 of 17
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.
    Amazon is losing money on Prime, but you have to remember, they are making a ton of money selling things. Amazon also makes billions with their web services division. Their web services division alone more than compensates Amazon's losses for Prime. 
    Prime is not meant to make money.
    It's meant to draw people into the Amazon infrastructure and lock them into that environment. 
    Just as Apple has loyalists who won't even consider another company, Amazon is drawing people into its web. 
    "I buy it from Amazon because I get free _______"
    "Amazon does it all ..."

    Soon, for many, Amazon will the primary supplier of their books, movies, music, gifts, food and medications -- and anything else they might need.
    1STnTENDERBITS
  • Reply 16 of 17
    airnerdairnerd Posts: 486member
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.

    "Free" prime shipping isn't.  It's discounted, and you can tell by shopping the same item without Prime.  It costs $2 more or so per item but then "free" 2 day shipping.  It's a gimmick but I use it often.  As for Music, free prime music doesn't have a lot of newer content.  You have to pay for the Apple Music equivalent even if you are Prime.  
  • Reply 17 of 17
    airnerd said:
    linkman said:
    So this $99/year plan is one more way for Spotify to lose even more money? It seems like their business model is the old "we lose money on every customer but we make up for it in volume."
    Hey! It works for Amazon! Why not Spotify? /s

    I’m curious how long Amazon can continue losing so much money as well.  I know, they occasionally make a profit, but how long can they offer Prime with “free” 2-day shipping, plus music, plus movies, plus whatever else you get with Prime.  If Apple truly operates iTMS at break even or slightly better then Amazon must be losing more and more money every time they add more to Prime.  I don’t get it.  A couple of years ago I saw a guy on YouTube talking about how the prior year (I think) Amazon had spent $6 billion on shipping costs but only charged customers $3 billion.  Like Spotify, I just don’t see how this is sustainable.

    "Free" prime shipping isn't.  It's discounted, and you can tell by shopping the same item without Prime.  It costs $2 more or so per item but then "free" 2 day shipping.  It's a gimmick but I use it often.  As for Music, free prime music doesn't have a lot of newer content.  You have to pay for the Apple Music equivalent even if you are Prime.  
    Huh, I was unaware that (if I’m reading this correctly) Amazon is charging slightly more for the items when it’s Prime shipping.  I usually call Prime “free” shipping because if you’re paying $99 a year then it’s not really free.  Whereas, when I shop on walmart.com I get free 2-day shipping and don’t have an annual fee attached.

    Interesting aside: I was looking for a small metal sign a couple of months ago.  I found the same item on Amazon and Walmart, both websites listed the same supplier of that item.  I don’t remember exactly but one of them had a lower cost on the item and the other had a lower shipping rate but when the cost and the shipping were added together the item cost the same on both Amazon and Walmart. 
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