Spotify vs. Netflix:
What PMs Can Learn from Freemium and Paid Models

by Cheerly Tannia Hartono • 4 December 2025

Picture yourself studying with a 3-hour lo-fi playlist playing in the background, and suddenly,

“DISCOVER NEW WAYS TO LISTEN TO MUSIC WITH SPOTIFY PREMIUM....”

Annoyed? Maybe. But this ad–and your eventual decision to upgrade to premium–is exactly what Spotify’s model built on.

Now let’s take a look at Netflix. No free trials, no ads (well, mostly), plus you can’t watch a single episode without paying. Yet, millions of people around the world happily do.

Both companies are massive; both are successful – but they play two very different games!

As product managers, understanding why these models work the way they do is key. Let’s unpack how freemium and paid models shape products, user journeys, and growth strategies.

What is this about?

Freemium offers a free version to attract users, then nudge them to pay for premium features later. Think of Spotify, Canva, or Notion.

Paid (Subscription or One-Time) requires users to pay upfront to access full experience. Like Netflix, Apple TV+, or Amazon Prime.

The Freemium Rollercoaster

Freemium may sound like a no-brainer: more users, more awareness, and more data. From a PM’s perspective, however, it’s a balancing act.

Every feature decision becomes a question:

"Should this be free or paid? If it’s free, will it drive engagement or cannibalize premium instead?"

Spotify’s free tier isn’t just a marketing tactic; it’s a product strategy. This free experience has limits (ads, shuffle-only playback on mobile), designed to keep users satisfied enough to stay, but not so satisfied that they never upgrade.

The conversion sweet spot often lies in solving the pain points created by the free tier.

For Spotify, that pain is interruption. For Notion, it’s storage limits. And for Zoom, it’s time caps.

Ultimately, freemium is a growth engine that trades short-term revenue for long-term adoption — but only if the upgrade path is intentional.

The Paid Model: Simplicity and Pressure

Then there’s Netflix – the “no free lunch” model. No pay, no play.

On the surface, it seems riskier. How do you convince someone to subscribe without letting them try first? But that’s exactly where PMs have to shine: through product excellence and strong onboarding.

Netflix invests heavily in personalization and content discovery, because every minute you spend watching is a minute closer to retention. Their product team’s north star is simply keeping users hooked long enough that canceling feels painful.

In paid models, churn becomes the enemy. Every new feature, notification, or even recommendation is about deepening engagement and emotional connection. You are not trying to convert free users; you are fighting to keep paying ones.

The Trade-offs for PMs

Your choice as a PM depends on what you’re optimizing for and where your product lives.

In early-stage or emerging markets, where users are exploring options and switching costs are low, freemium can accelerate adoption by lowering barriers to entry.

However, if your product competes on premium positioning, exclusivity, or strong brand loyalty, a paid model can drive higher customer lifetime value and more stable revenue streams.

Many modern companies mix both. Think YouTube Premium or LinkedIn Premium: free for the masses, but powerful enough for those who pay.

Key Takeaways

At the end of the day, choosing between freemium and paid is not just a pricing decision; it’s a product strategy decision. It affects everything from feature prioritization to onboarding, user research, marketing, and finally success metrics.

Spotify wins by letting users ‘taste’ the value first, while Netflix wins by creating an experience worth paying for from day one.
Both are right – because both built their entire product ecosystems around their chosen model.

Wrapping Up

Freemium and paid models aren’t rivals. They are different stories with different plot twists.

As PMs, our job is to choose the story that fits our product, our users, and our goals. Whether you are designing the next Spotify or a niche B2B tool, do remember that your business model is part of your product experience.

And sometimes, the real magic happens not in choosing between freemium or paid, but in knowing how to make either one feel worth it to your users.

Which model do you think works better for new startups – freemium or paid?

Share your take in the comments!

About the Author

#90: Cheerly Hartono

Cheerly is an Industrial Systems Engineering freshman with a passion for languages, problem-solving, and learning new skills outside the classroom. Prior to joining NUS Product Club, Cheerly led her high school's student council as its president - honing her detail-orientedness in ensuring the smooth operation of organising various events.

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