Spotify says it needs 40 million paid users, but is this possible?

Earphones are seen on top of a smart phone with a Spotify logo on it, in Zenica February 20, 2014. Online music streaming service Spotify is recruiting a U.S. financial reporting specialist, adding to speculation that the Swedish start-up is preparing for a share listing, which one banker said could value the firm at as much as $8 billion (4 billion pounds). REUTERS/Dado Ruvic (BOSNIA AND HERZEGOVINA - Tags: SCIENCE TECHNOLOGY BUSINESS SOCIETY) - RTX1971J (REUTERS/Dado Ruvic)

It was all a stream. In a recent interview with The New Yorker, Spotify’s CEO/Founder Daniel Ek projected royalty payouts to artists to increase by 400 percent once the streaming service hits 40 million paid subscribers.

Ek doesn’t give a timetable of when Spotify will reach this elusive 40 million paid subscribers, but Ek states he’s the only one who believes the company will reach such lofty goals. This proclamation surfaces two weeks after ECR Music Group founder Blake Morgan informed CNN that Spotify executives told him during a recent meeting in New York that “the per-stream rate that artists get will likely never go up, no matter how much Spotify grows, or how fast it grows.” Spotify currently pays about 70 percent of its subscription and ad sales revenue to rights holders. Warner Bros Music Group, Universal Music Group and Sony Music Entertainment holding equity in the company.

On the other hand, Spotify is not immune to making grand projections. A week before it landed on U.S. soil in July 2011, leaked marketing documents revealed Spotify’s projections of 50 million paid subscribers in its first year. In its first full year, Spotify accumulated three million paid subscribers.

After its paid subscription tier slowly increased its user base from 3 million in 2011 to 6 million at the end of 2013, it has more than doubled its rate of adoption, with more than 6 million new paid subscribers added in 2014 alone. Spotify’s year-to-year paid subscriptions increased by 500 percent in the past two years, a rate, that if it persists, would help Spotify reach its 40 million paid subscription milestone before the end of 2016.

Expansion through integration seems to be Spotify’s most effective means of user growth. The music streaming service bundled its streaming subscription with T-Mobile billing in June. In the three months prior, Spotify partnered with both Volvo’s Sensus Connected Touch and Ford Sync AppLink, connecting the streaming service to the millions of drivers using the each respective car maker’s service.