Spotify is headed towards a pivotal moment with an initial public offering (IPO) looming next month. As the world's largest music streaming service, there is a lot of buzz surrounding the company's IPO. Leading up to the big day, Spotify made an interesting revelation, saying that around two million music listeners have managed to skip listening to ads without being a paid subscriber by using unauthorized third-party apps designed to block ads.
These apps can essentially be seen as ad blockers for Spotify. It's unfortunate for Spotify, which offers two main tiers to choose from—a free music listening experience that is supported by advertising, and a subscription service that lets users listen to music without any ads interrupting the party. The revelation that millions of users are gaming the system with unauthorized apps caused Spotify to amend its subscriber count.
"On March 21, 2018, we detected instances of approximately two million users as of December 31, 2017, who have been suppressing advertisements without payment," the company said in an amended F-1 filing Friday with the SEC.
Spotify now claims 157 million active users as of the end of 2017, down from 159 million. The two million fraudulent users represents 1.3 percent of its previously reported user base. Out of the remaining 157 million users, nearly half are premium subscribers, with 71 million people ponying up for ad-free access to Spotify's streaming music catalog. That's almost double the 38 million paying subscribers Apple boasts for its own streaming music service, though Apple in pace to leapfrog Spotify in the US.
The number of fraudulent users probably isn't high enough to scare away investors, especially with 71 million people paying for premium access. In addition, Spotify has been trying to police the use of authorized apps by disabling accounts found to be accessing paid features without actually paying for them.