Last week we posted a report titled "With Apple on the Verge of Blasting into the Streaming Music business, Spotify scrambles to introduce a new Video Service." In that report we referenced a secondary report that pointed to the Music Industry frowning on Freemium Streaming Services and possibly rethinking the value of freemium streaming services going forward. Today we got to see the failure of the freemium music service business model in living color in segments of a Spotify management report that accompanied their latest financials written by directors Martin Lorentzon and Pär-Jorgen Pärson.

Lorentzon and Pärson had a note for the music labels and rivals like Apple that have been putting Spotify under pressure to abandon its unlimited, on-demand free tier, which three quarters of its 60 million users are on.

They noted that "Subscription-only models have not yet proven scale and free user models, whilst scaling, have not proven a path to profitability. Spotify has the combined power of both." The Guardian report added that Spotify has "yet to prove it has found the latter path."

The specific part of the report that has to be acknowledged within a sea of self-puffery is that Spotify's "financial results reveal that the 25% of Spotify users who pay for the service account for 91% of its income"reports the Guardian. That translates to the Freemium side of their market accounting for 75% of their business that's only paying 9% revenue from advertising.

No wonder the music industry wants to phase out freemium services. It's basically stealing music for a song and dance and making Spotify appear like a meaningful music streaming business by quoting 60 million customers. Reality is that 45 million Spotify users are basically music freeloaders, not "customers" worth being credited for in marketing campaigns.

In the end, Spotify's bottom line financials clearly justify the music industry's desire to phase out freemium streaming music services. When the industry was in trouble years ago with music being stolen en masse, Apple's late CEO Steve Jobs presented the music industry with their iTunes solution as a means of getting youth to legitimately pay for music again. That was a real plan compared to trying to defend the freemium model that serves no one but Spotify's self interests.

Today, by the very statistics from Spotify, we're able to see that freemium music streaming is a backward move back to basically ripping off music artists all over again – and it has to stop. Instead of Apple being investigated by European regulators, perhaps they should be investigating Spotify for being a part of destroying the music industry for their own gains. Though in context, keep in mind that it's the freemium model that has got to go, not the paid subscription side of the equation. That's a story for another day.

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