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Cocky Spotify drops time limits on free listening, skint music-lovers cheer

Even non-paying users are worth something to the admen

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As it promised to do before Christmas, Spotify has dropped restrictions on free listening with the celestial jukebox - but it's also removed restrictions on free desktop listening, too.

Previously the service capped the number of hours you could listen to music without a subscription. That listening contained advertisments, of course. To remove ads and gain offline access, you could buy a day pass, or take out a monthly subscription.

How could Spotify ditch that model?

Industry sources suggest that Spotify's maturing advertising sales operation - and a different advertising marketplace - have helped it to increase its advertising rates, and thus pay the royalties required by record companies and music publishers. From your listening profile it has always been possible to guess whether you're a well-heeled broadsheet-type reader or an impecunious, debt-laden student. But mobile also allows location-based advertising to come into play.

This is corroborated in a couple of ways. Academic David Touve has been going over the economics of digital streaming music services here, suggesting an active free Spotify listener may be worth $24 a year. That's far below the value of a (US) broadcast radio listener – but more than a Pandora listener.

And Spotify's director of economics Will Page – formerly of the Treasury and PRS – points out in a Spotify report that the advertising market is bouncing back from five years in the doldrums.

Spotify and other digital streaming services have come under increasingly vocal criticism from artists, including Talking Heads frontman David Byrne. Byrne wrote in the Guardian that record companies have been too keen to embrace the services – often using opaque equity deals – that sell musicians short.

"It seems to me that the whole model is unsustainable as a means of supporting creative work of any kind. Not just music. The inevitable result would seem to be that the internet will suck the creative content out of the whole world until nothing is left. Writers, for example, can't rely on making money from live performances – what are they supposed to do? Write ad copy?", he said.

Yet pricing music has always been tricky. At one end of the scale are a small-ish number of music enthusiasts who are happy to fork over significant wads of cash: the mythical "Fifty Quid Bloke". Price is irrelevant here - they're mad for music and have in recent years been paying a premium for vinyl.

At the other end of the scale, just over half of the UK public never buys any recorded music at all - it's happy hearing what it hears on the radio or in pubs and clubs and shopping centres. Yet all that streamed music being enjoyed for free nevertheless created revenue for artists too - even though cash wasn't being handed over.

So the trick for a Spotify-type operation is to increase revenues from both camps: upselling to enthusiasts, and increasing the revenue from people who don't buy, and wouldn't anyway - they're unlikely to be paying subscribers. With the changes to free listening it's tackling the latter. What goodies does it have in store for us with the former? ®

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