Premium vs. Free – [Narrator] Good things tend to come in pairs. Like this. Or this. Here at Spotify, we got premium and free. Both offer different features for different kinds of users, and both generate royalties in unique ways.
Let's kick it over to Preston. He's an expert in all the tools we make for artists here at Spotify.
He's also into hip-hop dancin'. – Yep. Premium users are music nerds.
They want to go deep
They want to be the first people to discover something new. On the other hand, free users want a much more guided experience. They're casual listeners. They're the kinds of people that are listening to the radio. – [Narrator] So you may be wondering, How does this affect me? You get paid whether or not a song is played by a premium subscription user, or a free user. – The difference is where the money comes from. – [Narrator] That's Colette. – Hi. – [Narrator] She manages engineers here at Spotify.
Oh! And she's played the cello since she was four. Looks like you guys are tight. – Yeah, it's my oldest friend. – [Narrator] Okay, so how does the payment work? – When an artist gets paid from a premium play, they're getting paid out of the total bucket of money that we've collected from all of our premium users. When they get paid for a free play, they're getting paid from the bucket of money that comes from all of our advertising. I feel like that makes sense, right? – [Narrator] Totally. And something else to consider: That today's free user, might be tomorrow's subscriber.
Some listeners might start out on the ad supported experience when they've got say, less cash to burn. But as they discover new playlists, and fall in love with new artists, many will decide to go premium. So let's talk about that listener experience. – So with the free experience, there are some restrictions. Most of the catalog that a free listener has access to, they can only shuffle through, so they don't have as much control over what they're listening to and when.
Free users also don't get some of the premium features, like high quality audio, unlimited skips, or the ability to save songs and play them offline. But they still get the most important feature for discovery: playlists. – One of the best promises about our free tier is introducing fans to the coolest, most interesting, and best music for them. – At the end of the day, a fan is a fan. No matter where they are, and no matter how they want to listen to music. And we want to help as many new fans discover you as possible. – [Narrator] Dope. Now that's something to celebrate. – Yeah, it's pretty cool. – [Narrator] Okay, thanks for watching.