Report: Spotify To Update Free Music Service

Spotify Technology SA is developing a new version of its free music service, the first big product change since the streaming company went public last week, according to Bloomberg citing  people familiar with the matter.

The company is tweaking the free service to make it easier to use, especially for customers on mobile phones, said the people, who asked not to be identified because the plans are still private. An announcement is expected within a couple weeks.

Spotify needs to attract large numbers of new listeners to satisfy investors who value the newly public company based on user growth. The free service generates customers that the company can steer into its paid offerings. The paid version accounts for less than half of Spotify’s customer base.

This model has worked well. Stockholm-based Spotify had 157 million user at the end of 2017, including 71 million paid subscribers. That’s the most of any online music service. The growth of paid streaming has boosted music industry sales for three years in a row.

With the updated service, free mobile listeners will be able to access playlists more quickly and have more control over what songs they hear on top playlists, mimicking Spotify’s ad-free subscription product. The basic package is $9.99 a month.

Spotify expects to reach about 200 million users by the end of the year, and as many as 96 million subscribers, according to a March forecast. Technology giants Amazon.com Inc., Apple Inc. and Alphabet Inc. are all vying for a larger share of the music subscription market.

Musicians have criticized Spotify for giving away music for free, and record label executives have asked Spotify to limit what is available to customers who don’t pay. The labels scored one victory last year in the latest round of negotiations, convincing Spotify to let artists delay the release of new works on the free service.

Meanwhile, PCMag reports Spotify this week launched a new Premium subscription plan that includes Hulu for $12.99 a month. Spotify Premium normally costs $9.99 a month and Hulu's Limited Commercials plan is typically $7.99 a month, so this new bundle option is $4.99 a month cheaper than subscribing to both separately.

At this point, the bundle is only available for existing Spotify Premium subscribers, but the companies plan to open it up to non-paying Spotify users this summer. For now, they are offering paying Spotify members a three-month trial of Hulu for $0.99; after that you'll be switched over to the $12.99 monthly bundle unless you cancel.