Spotify cuts Premium rate in half for college students

With so much competition, Spotify wants to hook in users while they are young

Financial trends and news by Steven Loeb
March 25, 2014
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Remember Joe Camel? He was the cartoon mascot of Camel cigarettes, who was forced into retirement back in 90s after critics accused Camel of trying to hook in children with their cartoon mascot. They said that the company was going for a  "get em while they're young" type of deal, something that the company, of course, denied. 

To be honest, as sleazy and wrong as it was to do this, it did make good business sense. Getting people while they are young and impressionable gives a company a good chance of keeping them as customers in the long run. 

So is anyone really surprised that tech companies now seem to be taking a similar approach? With so much competition, companies need to get users as young as possible. It's the reason that Facebook is freaking out so much over it's "teen problem."

There is no more competitive space right now, though, than music streaming. So, in a move designed to collect a bunch of new, young users and keep them, hopefully forever, Spotify has decided to cut the price of its Premium service in half for college students.

Users who sign up for Spotify's Premium service not only get ad-free listening, but higher quality audio and the ability to get on-demand access to any song via mobile. For non-Premium users, they only get a Pandora-like radio service when on the go.

Rather than paying $10 a month for these features, as everyone else has to, students who are currently enrolled in  accredited U.S. universities will only have to pay $5. Any student who is already a Premium member cannot get a discount for the current month, but they can register for the discount so that it will be applied on the next renewal date of their current subscription.

Spotify is using verification service SheerID to make sure that people who try to get the discount are actually enrolled in a college, and not attempting to take advantage of a discount they don't qualify for.

This is not the first time that Spotify has offered a similar deal to student: it introduced a similar discount to U.K. students in 2012.

While Spotify is one of the biggest companies in the music streaming space, it has a lot of catching up to if it wants to truly compete with Pandora. Spotify currently has over 24 million active users, but only a quarter, six million, are paying subscribers. Pandora, on the other hand, has more than 250 million registered users.

Spotify has to be hoping it can close that gap, at least a little bit, with this latest move.

There are nearly 17.5 million currently enrolled students in the United States. Even if only a quarter of those students sign up, it would net Spotify an extra $22 million in revenue and give them over four million new users. 

Since its launch in 2008, Spotify says it’s driven more than $1 billion to rights holders. it currently has over 20 million songs, with over 20,000 being added every day. It is available in 55 markets, including Austria, Iceland, Belgium, Bolivia, Malta, Portugal, Slovakia, Argentina, Nicaragua, Australia, Malaysia and Taiwan.

In November of last year, Spotify raised $250 million in new funding at a $4 billion valuation. That brought the company's total funding to $538 million. 

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