Spotify recently added another free service for students. For a monthly cost of $4.99, registered college students can now use Spotify Premium, Hulu and Showtime.
With this trio of entertainment applications, Spotify hopes to increase streams and broaden its target market in both current and future demographics that increasingly participate in monthly subscription services.
They have also intensified an already competitive market. Other companies will have to react in order to gain customers from a very important demographic.
Monthly subscription profit models are becoming more prevalent. Companies like Amazon and T-Mobile are adding entertainment-based supplements to their services as well.
The subscription model is a double-edged sword of revenue, stemming not only from the literal monthly income of the user, but also from the market share that the user provides in terms of
Every Spotify subscriber that uses the app for free Hulu or its music streaming service is unlikely to use Netflix or Apple Music.
This concept makes it easy to understand why private companies are willing to keep their monthly subscription prices very low, give a lot of amenities and benefits and offer huge discounts to college students.
They realize something Amazon understood long ago: profit is temporary, but market share is forever.
Today, more American households own an Amazon Prime account than a gun or landline telephone. Amazon has long run its company on a non-profit model, minimizing the surplus capital left after every quarter and running on a deficit in order to invest back into the company. The results have been positive for this risky and somewhat conflicting business ideology.
Amazon is one of the largest majority shareholders on both the e-commerce and cloud computing sectors. The company’s success has showed us that retaining customers and market shares is more important than creating a profit.
That is exactly what Spotify hopes to accomplish, as well as increasing their yearly advertisement revenue because of the increase in total users.
The ability to effectively advertise its own products and those interested in running advertisements through Spotify is vital, as traditional advertising is no longer effective.
Their model offers a way to profit from both free and paid subscription. They profit from paid users by directly charging them. They earn from free users by running advertisements.
Spotify is trying to ensure that it retains and grows market share at all costs and makes lifelong customers of every college student it gains. This will lead to unity in their subscription and advertising profit models — a harmony that is music to shareholders.
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