To answer your first question, mobile usability is limited with the free version (e.g. can only shuffle play, can't play straight through an album). Should they stick to the free version? That's a value proposition that can only be answered by the user.

>Following this suggested model, free users listening wouldn't help the artists at all - is that really desirable? I doubt it. Paid users are usually free users first. No free users means fewer paid users down the line.

I can't speak for Spotify, but can for Pandora... I listen maybe 20 hours a month, and just got sick of the ads... That's all there was to it. I don't want to curate my music more than a like/dislike and it works for me.

That said, I don't like the model that's currently in use for online-only music stations... it's tough all around.

Different people value the features of premium differently, no different than the market for any other good or service.

For instance, it is probably true that to some people $5 dollars a month is nothing compared to the torture of listening to a single ad ever.

I'm a paying light listener. I coudn't stand the ads and the audio quality on the freebie, plus I need the offline music feature when I'm travelling or commuting.

For free users the money divided would be the ad money.