Spotify offers a free membership and $9.99 per month subscription to its popular music service, but the No. 1 streaming service is effectively cannibalizing the industry, according to Rdio CEO Anthony Bay.
"The idea that giving it away for free leads more people to buy is flawed. You will convert a large number of people who would normally pay for something to the free service," Bay recently told CNBC.
Rdio has a free offer to stream radio stations, $3.99 stripped down tier, and $9.99 per month unlimited version as it offers radio and streaming stations. Unlike Spotify, music listeners don't control the music they listen to - but can purchase songs if they like it. However, Spotify is willing to be patient and wait for free users to upgrade to the paid subscription:
"What they are all trying for is user acquisition, it's a land grab for users. A lot aren't focused on immediate profitability. That will come after users increase," said Jack Kent, senior mobile analyst at HIS, in a statement to the CNBC.