Mary came across some emails Ovelar, El Pais, on account of a report being prepared on Spotify, which finally came out last day 6 in the print edition of the newspaper under the title " No more what it was given "(see pdf .) Then, as I do normally, a recast of the exchange of questions and answers that came across Mary
Q. Do you think these changes, which affect only the free accounts (reduction in hours of listening, reduction in the number of times you can listen to songs, reduction in the catalog of songs you can hear) are due to the freemium model has not worked at all to Spotify?
R. freemium models are based on a combination of some basic services are provided free of charge and an advanced or extended services to be accessed for a fee. The design and balance is extremely delicate: in general should be designed so that a user conversion rate from free to pay less than 10% allow business sustainability, and so the performance differential between the free versions payment and the occurrence of the progressive transfer of users. The business must be able to survive on less than 10% of paying members. Said conversely, a percentage less than 10% of paying members has to undergo more than 90% of free users, and still generate a profit. And 10% is an optimistic number, many businesses in the model freemium subsist even lower conversion rates. The rate of conversion of many other similar models usually freemium consistently below 10% (and very often around 3% - 5%). Therefore the system must be sized to be able to achieve profitability with that percentage of users to pay, because that's what you can reasonably get.
In the case of Flickr, for example, it was clear that the cost of a free rider, that figure mainly as cost of storage and bandwidth transmission evolve a clearly downward, making it possible to be aggressive Flickr in the prices of the premium account and promote efficient conversion. Both the storage and the bandwidth costs are decreasing trend, like many other technology costs (the cost of processing, for example). So today you can buy a computer with a hundred times more hard drive than ten years ago for a fraction of its price, and now you can have a bandwidth of fifty megawatts less than what you paid for a telephone connection when very few people used it. The technology tends to have negative cost curves as their components are manufactured more efficiently and allows users greater volume of economies of scale. Licences, of course, do not evolve as well - especially if the owners insist on holding them impossible business models ...
In the case of Spotify, the licensing cost is primarily payable to a record are also its shareholders, a cost that does not evolve downwards, and record companies also intend to pass a return similar to what it was in the time when engaged in manufacturing plastic stands, encapsulate them in boxes with full color brochures, putting them in cardboard boxes, distributed by truck, and sell them at stores that charged a large margin. Under these conditions, it was clear that the service was free of expiration date, and would not support an expansion to infinity. The problem is to pretend that a service like Spotify can achieve their goals of conversion to paying customers without a free hand sufficiently attractive, bringing a commitment to Spotify users and almost impossible to record in any of the parties seems willing to budge an inch and the other deals are and will remain accessible. Spotify has traditionally been very cautious about opening markets, and has been planted just before the entry into the U.S. market, when an excessive increase in the scale could lead to unsustainable costs.
