Spotify makes the vast majority of its revenue from paid subscriptions, but those subscribers are a relatively small minority of all Spotify listeners.

Seeking to boost the important core of Spotify's business model, the streaming company just joined most of its competition in offering a Premium family plan.

New Family Plan

Until now, the standard paid Spotify subscription plan, Spotify Premium, charged single users $9.99 per month for unlimited ad-free listening across multiple platforms and devices.

Spotify has had a family plan (of sorts) since 2014, as TechCrunch noted. But it was more like a family discount: You could add extra family accounts for a 50 percent discount, so if you and your spouse wanted separate personalized profiles on the same basic account, it would cost $14.99 per month. Add the kid in, and you're up to about $20 per month. The costs add up quickly the more family members you add.

Now there's a proper Spotify family plan that works for bigger families. Spotify's family plan costs $14.99 for up to six accounts. So for couples it will cost the same as the old discount model, but the savings ratchet up the more family members you have. Big families of six will save $20 a month over the old model.

Interestingly, the new Spotify family plan is pretty much identical to the family plan offered by Apple Music, which has put a target on Spotify's back since last summer's launch by Apple.

Apple now has 13 million subscribers, which is still far out-matched by Spotify's 30 million subscribers, but the Swedish streaming music giant is definitely feeling the heat from Tim Cook and company.

Priority on Premium

Spotify's also feeling the chill in online advertising rates.

And as Quartz reported on Monday, according to the company's latest financials, Spotify is extremely reliant on its paid subscribers, which make up a tiny core of Spotify listeners.

Right now, Spotify Premium customers make up only 30 percent of all Spotify listeners -- with the ad-supported free tier making up the vast majority of streaming users.

But nearly 90 percent of the company's record 2.18 billion in revenue for 2015 came from Spotify Premium subscriptions, while barely over 10 percent of its revenue came from selling advertising to the free-tier listeners.

Ad-Supported? Barely

That's a business model where ten percent of revenue comes from advertising to 70 percent of all listeners (about 61 million people in 2015), while 90 percent of your revenues come from the 30 percent (28 million) who pay.

Translation: Any overall growth of its business is inevitably bound to the growth in Spotify's paid subscribers.

Advertising, despite Spotify's incredible scaling, is simply not doing the job. Of course, it's not like Spotify is being dragged down by its ad-supported tier, but it's obvious the company needs more paid subscribers to sustain growth.

It's not surprising, then, that the same day Spotify announced its premium family plan, it also partnered with PlayStation to offer three months of Spotify Premium through PS Music for less than one dollar.

That promotion ends June 30th and is only available to those who have not previously received a trial of Spotify Premium, and credit card details are required to pay the $0.99. You can bet it's especially available to those who habitually forget to cancel trial subscriptions.

Related