Why Spotify Is Offering College Students Cheaper Digital Subscriptions

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Spotify, the music streaming website used by 24 million people every month, declared early Tuesday that it will reduce its fees by 50 percent for college students, from the standard monthly fee of $9.99 to $4.99 per month for individuals studying at an accredited institution.

At a time when over 95 percent of people between the ages of 18 to 24 download music illegally, according to Save the Music, more affordable music will undoubtedly appeal to students nationwide. But competition from other music syndicates makes this new policy a gamble.

Apple, the biggest music store today, recently revamped its efforts to secure exclusivity rights. Specifically, the company is now focused on obtaining new release privileges, in an attempt to counter declining album sales — which fell 5.7 percent last year, across all sales platforms. Leading up to the Grammy’s last February, Apple management met with label executives to campaign for the ability to release new digital albums for sale, prior to artists distributing albums to free streaming sites like Spotify or Pandora. After Beyonce sold 1 million copies on iTunes within one week of her secret release last year, it is plausible that artists and labels will heed Apple’s request.

If Apple succeeds in securing these privileges, it may create an advantage that will hurt Spotify’s profits over time. Numerous artists have collaborated with Spotify to release exclusive albums previously, but Apple may bring those artists back into its own web. Moreover, consumers in search of quick access to new music may direct their funds in iTunes’ direction.

Streaming is a serious source of Spotify’s revenue currently. And while they may be willing to take a small price hit to entice new customers, there’s another potential stream of funding they’re looking at. To prove eligibility, students must provide their names, schools, date of birth, and can be asked for college email addresses, student ids, or class schedules. There may be some revenue in collecting and potentially selling this data.

But privacy concerns may also hurt the site. Security breaches are becoming a prominent concern, and not everyone is willing to give up their personal information in exchange for cheaper music.