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Spotify U.S. Subscriber Base Not Growing As Expected

Just after Spotify announced that it's extending the "free" service beyond the six-month limit, reports have surfaced that the digital music service has been under-delivering in terms of subscribers. This may be why the free period has been extended -- an attempt to reel in new potential subscribers and boost slacking revenue.

Insiders told the New York Post that there are fewer people paying for subscriptions than expected. The streaming music service launched nine months ago, offering an ad-based free account and two paid subscriptions, the latter of which is an all-you-can-eat music buffet that can even be accessed via a mobile phone.

But Spotify's numbers say that 3 million U.S.-based users have signed up since June 2011, but only 20-percent are actually paying for a subscription. "People aren’t 100 percent happy," said one music-industry insider. "Spotify overpromised, but doesn’t everybody?"

The service has changed quite a bit since we provided a hands-on at launch. The desktop feature now supports apps provided by the likes of Last.fm, Rolling Stone, Tunewiki and more. The entire main page has been revamped to list trending playlists, top tracks among friends, top tracks and top playlists in your area. Spotify even provides radio stations of all genres including 80s, 90s, Heavy Metal, Pop and more.

Why paid users really haven't flocked to the new service is unknown. Spotify is even more Facebook friendly than it was at launch. But let's face it: there are similar if not better services on the market that don't charge for mobile listening like Slacker Radio which doesn't force users to download a desktop client. But with the extension of its free account, Spotify may finally be caving in to competition as did MOG.

"The question is, how sticky is Spotify? Is it able to hold on to users for more than a year?" one source said. "The free people are not signing up for a long period of time, or at the highest pricing tier, or they’re not renewing."

Are music subscription services worth the price? Is this a dying model that really never took off in the first place? Slacker Radio actually seems to be doing rather well, as the company reportedly expands its storage of around 60 TB every six to nine months, meaning its user base is increasing, with over 30 million listeners served each day.