Spotify Changes Their Privacy Policy – Should You be Worried?

Spotify has a similar story to Google, the company was formed by two guys in an apartment. It was founded in 2006 by Daniel Ek and Martin Lorentzon with servers running round the clock around them. They had no idea that after a decade Spotify will welcome more than 75 million users around the world. The company grew rapidly across all devices and raised $21.6 million dollars to cater the needs of its consumers. Along the way, Spotify encountered some troubles with data leaks and a problem with Symantec’s antivirus but that didn’t stop its growth. The company had a great business model and raised funds accordingly to pay off music labels and partnered with Facebook for integration. Fast forward today, Spotify is home to more than 20 million paid subscribers, 75 million active users, hundreds of millions of dollars in funding and over $3 billion paid to artists.

SpotifySpotify is the most popular music streaming app that stunned the world with this new concept. At the time of launch, music streaming was not so popular. In fact in 2005, YouTube was new and had problems of its own. Spotify and YouTube both grew together into billion dollar products and the only difference is that the latter was acquired by Google while Spotify grew on its own.

The troubles that haunt Spotify did not cause any major damages but recent decisions by the management can very well cause a huge outbreak, especially when new streaming services are already threatening. Apple just launched Apple Music and it is a major threat to Spotify. There are millions of iPhone users in the world and Apple wants them to switch to Apple Music and forget about Spotify. The timing of policy change by Spotify cannot get any worse.

After increased pressure from music labels, Spotify is being forced to limit access to free users. Non-paying users will get limited streaming minutes and access to only a few songs from popular albums starting next year. 55 million out of 75 million actives users on Spotify use the service for free. Spotify generates revenue using ads in order to keep offering services to free users. A lot of artists have attacked Spotify on low payments to artist and as a result Taylor Swift even removed all her music from the streaming service.

You cannot blame an artist because music CDs retail has almost vanished and all the content delivery is now digital. The real test for Spotify is to convert these non-paying consumers in to paid subscribers. Don’t forget, Apple also offers music streaming service for $10 and it is still waiting for the three month trial period to end so it can count the number of paid subscribers.

This change in Spotify’s policy can be the deciding factor for both music streaming services. Since both services will be paid, users will need to decide which one to choose. Either go for a renowned music company, Spotify, or switch to one of the biggest smartphone manufacturers in the world. Sadly, Spotify has very limited choices here. Its contracts are pending renewal and in order to keep providing users with a 30 million songs catalog it has to cater to the demands by music labels.

Either it can offer them ridiculous amount of money or just limit access to free users. There is no win-win situation for Spotify. The company needs to think about alternatives on how to turn free users in to paying subscribers and at the same time deal with the threat from Apple Music.

In terms of users, they always prefer the free service and it is very hard to convince them to pay for it. The 75 million active user statistic will decrease rapidly. Although it might not hurt Spotify much because it’s revenue is generated from the other 20 million subscribers. The major chunk of revenue comes from its paid subscribers and advertisers. It generates approximately $850 million each year and it would want this number to grow rather than decrease.

This is a disastrous month for Spotify. The recent privacy policy change allows Spotify to collect data stored in your smartphone such as contacts, media files, photos, location and also information from your Facebook such as your name, profile picture, country, email, friends’ names and much more. Not only can  Spotify access this information, it will also share it with third parties such as advertisers.

Thousands of complaints have registered against the company which has forced its CEO and Founder Daniel Ek to provide an explanation. He says that this information is only collected to develop future products and enhance user experience. User’s identity is kept anonymous when the data is shared with third parties. He added that Spotify will ask for your permission when accessing this information and you can decide against it.

Never the less, Spotify will have access to majority of data and this has creeped out a lot of users. This is another major blow for Spotify especially when competition is at its peak. The music streaming service has fallen in to a trap and it needs to find a way to get out fast. Apple Music’s trial period is at the ending stages and Spotify has to retain its users otherwise its revenue stream will fall by a big margin.

The utmost priority is to strike a deal with the record labels and then resolve any issues regarding the privacy policy. At the moment, the only way to stop Spotify from accessing your data is to stop using the app. Obviously the company does not want that to happen so an alternative solution should be on the table. Will Spotify be able to retain its users or Apple Music will take them away? The answer to this question depends on the next big decision by its CEO.

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