Spotify hates churn.
To remind you, ‘churn’, has become a staple of the streaming music company’s earnings call discussions – and a key performance indicator for its analyst and investor observers. (In a nutshell, ‘churn’ refers to the average number of current paying subscribers who cancel their accounts at Spotify each month.)
As Barry McCarthy, ex-Netflix exec and now-Spotify CFO explained at the company’s Investor Day in New York last year: “The primary driver of lifetime value at Spotify is churn. And the primary driver of churn is customer satisfaction.”
Today (October 22), Spotify has made a surprising move to keep those customers satisfied. The firm has just announced that it will be giving away a Google Home Mini device to both new and existing Premium subscribers in the United States, while stocks last.
The offer, which applies to any individual or Family Plan Spotify premium account holder, will come to a close on November 15, according to the fine print on Spotify’s promo page. But until then – so long as the physical stock exists – anyone currently paying (or willing to pay) for a premium Spotify account in the States can get themselves a Google Home Mini, which usually retail for $49.
Today’s move is obviously designed to help Spotify fight off the in-home, music-plus-hardware threat posed by the likes of Amazon’s Echo speaker (and its Amazon Music streaming platform).
However, giving away free hardware to existing customers will also help to keep Spotify’s monthly premium ‘churn’ rate low in competitive landscape: SPOT announced in its Q2 2019 results that its average monthly churn had fallen to a record-low 4.6% in the quarter; that means somewhere around 5m people amongst the 108m paying subscribers it counted in that quarter would have ‘replaced’ others who had cancelled their subs.
This 4.6% monthly churn figure was significantly down on what Spotify has seen in the past: according to its F-1 SEC filing from last year, SPOT saw an average premium churn rate of 7.5% per month back in Q4 2015, which had fallen to 5.1% by Q4 2017.
In a press release today announcing the new Google Home Mini giveaway, Marc Hazan, Vice President Premium Partnerships, Spotify, said: “At our core, Spotify Premium wants to make it easy to enjoy your favorite music anytime, anywhere.
“We were delighted by the response of our first Google Home Mini offer last year, which is why we’re excited to extend our partnership with Google and expand the offer to now include both Family and Individual Premium plans.
“With the holidays just around the corner, Spotify and Google Home Mini are helping you fill your homes with music you love by simply using your voice.”
Spotify unveiled a similar Google Home Mini giveaway last year, but only for the ‘master’ account holders of SPOT Family Plans – Individual accounts were not included.
Interestingly, in today’s announcement, Spotify says it’s “looking forward to rolling out new features with Google that make it even easier to discover and listen to Spotify via Google Home Mini and other Assistant powered devices” – but doesn’t qualify exactly what that means. Watch this space.Music Business Worldwide