Spotify became profitable by combining a genuinely useful free tier with disciplined, regular price rises once switching costs were high. 2024 was its first full year of operating profit, about €1.4 billion. By Q3 2026 it had 306 million Premium subscribers, 788 million monthly users and €672 million of quarterly operating income, after lifting the US Individual plan to $12.99.
Key takeaways
- 2024 was Spotify's first full year of operating profit, about €1.4 billion.
- Q3 2026: 306 million Premium subscribers (up 9%), 788 million monthly users (up 11%), €672 million operating income.
- About 39% of Spotify's monthly users pay. The rest are the free funnel it converts from.
- The US Individual plan rose from $11.99 to $12.99 in January 2026, about 8%.
Imagine building one of the most loved products on the planet. Hundreds of millions of people use it every day. They make playlists with it, fall asleep to it, run marathons to it.
And for years, you can't turn a full-year profit.
That was Spotify. When I wrote The Subscription Playbook, it was my go-to example of freemium done right and of mixing pricing models: a free tier paid for by ads, feeding a paid subscription that was "the backbone of Spotify's payment model."
What I couldn't show you in 2022 was the profit. Now I can.
The numbers: from "no profit" to €672 million a quarter
| When | Premium subscribers | Monthly active users | Operating income |
|---|---|---|---|
| End of 2024 | 263 million | 675 million | About €1.4 billion for the full year (first full-year profit) |
| Q4 2025 | 290 million | – | €701 million for the quarter |
| Q3 2026 | 306 million (up 9%) | 788 million (up 11%) | €672 million for the quarter |
Price moves along the way:
- 2024: Premium revenue per user rose 7%, partly thanks to price increases.
- January 2026: US Individual plan up from $11.99 to $12.99 a month (about 8%), with similar rises on Duo and Family.
What did Spotify do?
Nothing flashy. That's the point.
It kept the same basic model it had when I wrote the book (free with ads, paid without) and did three things consistently.
It kept the free tier genuinely useful. You can listen to an enormous catalog without paying a cent. That keeps hundreds of millions of people inside the app.
It kept the free tier close to, but clearly below, the paid one. Ads, less control, fewer features. In Chapter 9 I described how Spotify shows free users the features they can't use, then offers the upgrade right at that moment. It's an upsell triggered by the user's own behavior.
It raised prices, steadily. Not once, in a panic. Most years, in modest steps.
Put that together and about 39% of Spotify's 788 million monthly users now pay (306 million ÷ 788 million). For a freemium product, that's a remarkable conversion rate.
Plan your next price rise
See how much revenue a price increase adds, and how much churn you could absorb before it backfires, with the free Price Increase Simulator.
Why did it finally make money?
Two reasons. One is about conversion, and one is about switching costs.
The free tier is the funnel
In Chapter 3 I said freemium works when you find "a balance between value and comfort." Give away enough that free users stay. Hold back enough that the paid plan is worth it.
Spotify gets that balance right. Its free users aren't a cost to be tolerated. They're the pool it converts from. See my guide to free-to-paid conversion rates for what normal looks like (and why 39% isn't).
Your playlists are the moat
Here's the part I'd underline for any business owner.
Spotify's switching costs are built out of the customer's own stuff: years of playlists, liked songs, listening history and recommendations tuned to their taste. Another service can match the catalog. It can't match your library.
In the MOATS framework, that's S for Switching. When leaving means losing something you've built, a $1 price rise isn't worth the hassle of moving.
That's why the price rises stuck. Spotify didn't raise prices to become sticky. It became sticky, then raised prices.
The order matters
Plenty of businesses try Spotify's price rises without Spotify's switching costs. If customers lose nothing by leaving, a price rise is an invitation to shop around. Build the switching cost first.
What the book said in 2022
I used Spotify in two places.
In Chapter 3, as proof that "you don't have to stick to one model." Spotify combines the advertising pricing model with a regular fixed-fee subscription, and uses one to feed the other.
And in the section on freemium vs free trials, as the example of a free tier that "still provides enough value to make it worthwhile for the customer" while the Premium tier packs in "no ads, higher quality streaming, the ability to listen offline, and other valuable perks."
What's happened since
The model stayed the same. The discipline changed.
Spotify turned in its first full year of operating profit in 2024 (about €1.4 billion), then kept it going: €701 million of operating income in Q4 2025 and €672 million in Q3 2026. Subscribers grew from 263 million at the end of 2024 to 306 million in Q3 2026.
The lesson isn't "freemium wins." It's that freemium plus switching costs plus patient price rises wins. Remove any one of those and the numbers look very different.
What you can steal from Spotify
- Make your free offer good enough that people stay. A newsletter people actually read. A free starter plan that does one job well. A free first consult that solves something. That's your conversion pool.
- Show free users what they're missing, at the moment they miss it. "This feature is on the paid plan" works best right when someone tries to use it.
- Raise prices on a schedule. Small and regular beats big and rare. Grandfather loyal customers for a few months to soften it. The price increase guide covers notice periods and wording.
- Build switching costs out of the customer's own data. Their history, preferences, saved work, past orders, notes. The more of them lives in your service, the less a competitor's discount matters.
- Measure conversion, not just sign-ups. Know what share of free users become paying ones each month.
Worked example: a small freemium funnel
An online fitness coach has 2,000 people on a free weekly workout email. If 4% upgrade to a $29-a-month program, that's 80 members and $2,320 a month. Lift conversion to 6% by adding a "try the full program" prompt after week four, and it's 120 members and $3,480 a month, from the same list. (Illustrative numbers.)
Your next step
Look at what you give away for free today. Ask two questions: is it good enough that people stick around, and is there a clear moment where the paid version solves a problem the free one can't?
If either answer is no, fix that before you raise a single price. Then compare the current Spotify pricing teardown with how Netflix used price rises and an ad tier, and decide which playbook fits your business.
Frequently asked questions
When did Spotify become profitable?
2024 was Spotify's first full year of operating profit, about €1.4 billion, according to Music Business Worldwide's coverage of its results. It had posted profitable quarters before, but never a full year. It stayed profitable through 2025 and 2026, with €701 million of operating income in Q4 2025 and €672 million in Q3 2026.
How much does Spotify Premium cost in the US?
In January 2026 Spotify raised the US Individual plan from $11.99 to $12.99 a month, with similar rises on its Duo and Family plans, according to CNBC. Prices differ by country and Spotify has raised them most years recently, so check Spotify's own site for the current figure in your market.
What percentage of Spotify users pay?
In Q3 2026 Spotify reported 306 million Premium subscribers and 788 million monthly active users, so roughly 39% of its monthly users pay. That's an unusually high conversion rate for a freemium product, helped by a free tier with real limits (ads, less control) that sits close to the paid one.
Does Spotify make more money from ads or subscriptions?
Subscriptions are the backbone. In The Subscription Playbook I described Spotify as subscription-led with advertising layered on to monetize free users. The free tier earns ad revenue and, more importantly, acts as the pool Spotify converts paying subscribers from.
Can a small business copy Spotify's freemium model?
Only if free users cost you very little and some of them will upgrade. Spotify's free tier is cheap to serve per user and its paid tier removes real annoyances. A service business usually can't give its core work away, but it can offer a free newsletter, checklist or starter tier as the top of the funnel.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- Music Business Worldwide, Spotify 2024 results (4 Feb 2025)
- Spotify newsroom, Q4 2025 earnings (10 Feb 2026)
- CNBC, Spotify raises US Premium price (15 Jan 2026)
- Spotify newsroom, Q3 2026 earnings (22 Oct 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.