Faced with a growing subscriber base but slipping average revenue per user, Spotify is experimenting with changes to its popular family plan in order to cut back on unauthorized sharing among friends.
According to reports, a small number of "Premium for Family" subscribers in the U.S. and Germany, as well as two other markets, have received emails asking users to confirm their address through GPS data. "If you don't confirm, you may lose access to the plan," the message reads above a large "Confirm now" button.
The test was performed in just four markets worldwide, and has now been completed, a source tells Billboard, though it's not clear what Spotify will do with the results.
Spotify policy states that in order to qualify for the family plan, which is $15 for up to six accounts, all members must live at the same address. However, many users who have received the new notices have pointed out that not all families have such rigid living arrangements -- and that it is not unusual for family members to live apart (example: college residents).
The notices to select users also address possible privacy concerns users may have stemming from the GPS component of the verification process, saying the company "will only use your GPS data to verify your location and nothing else."
Confirming that all family members live together will "help to pay artists fairly for their music," the company adds.
Spotify introduced its current family plan in 2016 as a way to match Apple Music, which had earlier set its pricing at $15 for up to six members. Before it began mirroring Apple, Spotify's family plan was $10 for the "master" account and $5 for each additional person.
As previously reported, while Spotify's subscriber base continues to grow, the average revenue it gets per user (ARPU) is shrinking, with family plans being one of the reasons for that disparity. Industry sources told Billboard last month that nearly half of global streaming subscribers are on family plans and some music executives have voiced concern over Spotify's ARPU, which declined 12 percent in the second quarter of 2018 from the prior-year quarter.
When it comes time to negotiate licensing deals, it's believed some labels will be pushing Spotify to adjust the parameters of its family plan -- changes that could include a price bump and/or a reduced user cap. A higher price could help compensate for the potential revenue being lost when family-plan subscribers share their passwords with friends. Such account-sharing is a common -- and costly -- problem for non-music services like Netflix and Hulu. According to media research firm Magid, about 35 percent of millennials share passwords for streaming services.
Spotify hasn't revealed the scope of the location-verifying policy, only that it is being tested using a small sample in "select" areas. "Spotify is currently testing improvements to the user experience of Premium for Family with small user groups in select markets," a spokesperson said in a statement. "We are always testing new products and experiences at Spotify, but have no further news to share regarding this particular feature test at this time."
