Spotify Usage and Revenue Statistics (2018)

Mansoor Iqbal

Updated: February 27, 2019

Spotify is the world’s biggest music streaming platform by number of subscribers. Users of the service simply need to register to have access to one of the biggest-ever collections of music in history, plus podcasts, and other audio content.

It operates on a freemium model. Free Spotify access comes with lower sound quality, and advertisements, and requires an internet connection. Those who pay for Spotify Premium can listen uninterrupted to high-quality recordings, and are able to download songs to any device on which they have the Spotify app.

Spotify was founded in 2006 in Stockholm, Sweden, by Daniel Ek and Martin Lorentzon. The two wanted to create a legal digital music platform to respond to growing challenge of online music piracy in the early 2000s.

Eventually convincing record labels to agree to share content in return for an aggregate 20% stake, Spotify was launched in 2008. It was an instant success, with a Facebook partnership helping it rise rapidly to prominence. Surviving the transition to mobile technology, Spotify went public in April 2018, with a market cap of $26.5 billion after the first day of trading.

It has drawn criticism from recording artists, who complain that it pays too little. Claims to democratize the music industry have also been questioned, with the world’s biggest four music labels responsible for 87% of content available on Spotify.

Unfair or not, with the days of physical music long behind us (with the exception of vinyl junkies), Spotify dominates the way we consume music in the 21st century. It does not have the run of the market, however. Its rivals include Jay Z’s TIDAL, Pandora, and most ominously Apple Music, which is aggressively seeking to gain market share.

Want to know more about Spotify, who Spotify’s users are, what Spotify is worth, and more? Then keep reading…

Table of Contents

Spotify User Statistics

Spotify Usage Statistics

Spotify Revenue Statistics

Key Spotify Statistics

  • 191 monthly active Spotify users
  • 87 million of these are Spotify Premium subscribers
  • Spotify’s can lay claim to 36% of the global streaming market
  • Average users listen to 41 unique artists per week
  • Average hours spent listening to Spotify per month stands at 25 hours
  • 44% of users listen to Spotify on a daily basis
  • 40 million tracks available on Spotify
  • Drake, WizKid and Kyla”s “One Dance” the first song to surpass 1 billion streams
  • Ed Sheeran was the most listened-to artist of 2017 with 6.3 billion streams
  • Sheeran’s “Shape of You” most listened song in Spotify’s history with close to 2 billion streams
  • Sheeran is also the most followed artist, with 28.5 million followers
  • Drake currently leads the way in monthly streams, at 43 million
  • Around a third of Spotify listening time is spent on Spotify-generated playlists, with another third going on user-generated playlists
  • “Today’s Top Hits” playlist is followed by nearly 20 million people
  • Other influential playlists include “RapCaviar” with over 10 million followers and “¡Viva Latino!” with 9 million followers
  • Spotify quarterly revenue in Q3 2018 stood at €1.35 billion ($1.5 billion), €1.2 billion ($1.35 billion) of which came from Spotify Premium subscribers
  • Gross profit in the same quarter was €342 million ($386 million), with operating loss at €6 million ($7 million)
  • One Spotify stream is worth about $0.006 to $0.0084 to an artist
  • Spotify accounts for 30% of total revenue generated by the recorded music industry, and 42% of the streaming market
  • Spotify went public in April 2018, with a valuation of $26.5 billion by the end of the first day’s trading
  • Spotify valuation in late November 2018 was $25 billion
  • Highest valuation to date is $35 billion in July 2018

Spotify User Statistics

There were 191 million monthly active users of Spotify according to the company’s official Q3 2018 report. Of these, 87 million were Spotify Premium subscribers.

This is up from 180 monthly active Spotify users and 83 million Spotify Premium subscribers in Q2 2017. Year-on-year, it’s a 41 million increase in users (28%), and 25 million increase in subscribers (40%).

The current percentage of subscribers out of total MAUs stands at 46% – the same as in the previous quarter and around the level it has been hovering since late 2017. Taking a more long-term view, we can see that the percentage has been creeping up over time.

Spotify MAUs vs subscribers 

Spotify MAUs vs subscribers 

Source: Statista

Spotify anticipates that total monthly users will increase to 199-206 million, and Spotify Premium users to 93-96 million in the final quarter of 2018.

The below chart shows Spotify user growth from launch until 2017, marking the introduction of new features such as the family payment plan, and Uber integration (users can choose to play their own music when taking an Uber). We might note a sharp uptick in both users and subscribers around 2015.

The introduction of new playlist features is notable here – Spotify-curated playlists are responsible for a huge proportion of listens on the platform.  More on this in the Spotify Usage Statistics below

Spotify long-term user growth + features

Spotify long-term user growth + features

Source: Goodwater Capital 

Spotify users and subscribers by region

Breaking it down by region, it seems there’s not a huge difference in the geographies of Spotify users and Spotify subscribers. Europe is the biggest market in both cases. Spotify reports that the fastest growth is occurring in less-established markets such as Latin America and ‘rest of world’ (which encompasses Asia)

Spotify users by region

Spotify users by region

Source: Spotify

Spotify subscribers by region

Source: Spotify

As we can see from the below graphic, Spotify users from the rest of the world increased by nearly 150%, while growth in Latin America was around 83% over 2016 and 2017.

Spotify user growth by regionSpotify user growth by region

Source: Goodwater Capital 

Spotify vs. other music streaming services

In the US, Spotify has been overtaken by Apple Music as the biggest subscriber music service. Both services reportedly have around 20 million US subscribers, with Apple inching ahead in July 2018.

Spotify is a global enterprise, however, and has recently launched across 13 countries in the Middle East and North Africa. Mexico City boasts the world’s biggest concentration of Spotify users (after launching in 2013). Spotify doesn’t reveal specific user numbers in Mexico’s capital city, however.

Looking at the global picture, Spotify remains comfortably in the lead. Since the below graphic was produced, both Apple Music and Spotify subscriber numbers have increased by around 4 million.

Spotify vs. Apple Music global subscribers

https://www.statista.com/chart/8399/spotify-apple-music-paid-subscribers/

Source: Statista

In terms of market share of the global streaming services (H1 2018), Spotify was at 36% (unchanged), while Apple had climbed from 17% to 19%. Amazon is a touch further behind on 12%, while Tencent Music – the offering of the Chinese online behemoth of the same name, claimed around 8% by virtue of its 17.6 million subscribers.

According to Midia, 230 million streaming music service subscribers brought in $3.5 billion worth of revenue in the time under consideration.

Global music streaming services market share

https://www.statista.com/chart/8399/spotify-apple-music-paid-subscribers/

Source: Midia

Spotify users by age

Looking at a survey of US streaming service users dating to late 2017, we can see that Spotify is by far the most-popular channel with under-30s, with only US-specific Pandora coming close. Notably, nearly twice as many under-30s used Spotify as used Apple Music in the three months prior to the survey – perhaps something to do with the free service.

Spotify also edges out every channel but Pandora and Amazon Music (only by 1% in the latter) in the over-30s category.

Spotify users: under-30s vs. over-30s

Spotify users: under-30s vs. over-30s

Source: Goodwater Capital 

Further breaking down US Spotify users by age, we see, as with so many apps, that younger demographics dominate. The 25-34 age bracket edges out the 18-24 in this case, perhaps reflecting the more universal nature of music across age groups. This sees a less pronounced skew towards youth than we see with some apps. Interesting, the third-biggest age bracket is the over 55s. Perhaps retirement or increased leisure time is giving them more time to reacquaint themselves with the vast catalogue of music available on Spotify – if not discover something new.

US Spotify users by age and gender vs Apple Music and Pandora

Spotify user demographics

Source: Verto Analytics

Confirming what was found above, we see that Spotify has the most youthful user base of the three platforms, with over half of users aged 34 or under, compared with 40% of Apple and 39% of Pandora users. Apple Music and Pandora seem to have quite similar user demographics in this analysis, while Spotify stands out for its younger and more male listenership.

Spotify users by gender

The above graphic also breaks down each service by gender. Interestingly, it reveals that Spotify is the most male-dominated platform. Apple music flips the percentages exactly, with as many female listeners as Spotify has male. Both come closer to parity than Pandora, for which close to six in 10 listeners were female.

A different US analysis corroborates the above, showing that around 23% of male respondents, and 20% of female reported that they were members of Spotify as of March 2018.

US Spotify subscribers by gender

US Spotify subscribers by gender

Source: Statista

Spotify vs radio

While physical media might be being outpaced by streaming, another industry that is increasingly finding its consumer base eroded by Spotify is commercial radio. Indeed, if we look to the UK, we can see that Spotify has a far greater reach than any commercial radio station.

Spotify vs radio reach UK

Spotify vs radio reach UK

Source: the Drum

Spotify also overtook BBC Radio 1 in early 2017, making it the most-listened to radio station overall in the UK. Notably, some obviously prescient key staff members had jumped ship from the public station to Spotify in the years preceding the coming into being of this new paradigm.

Spotify Usage Statistics

Spotify data shows that the average listener is increasing the number of unique artists to whom they are listening. Between 2014 and 2017 the number increased 37% from 30 to 41 per week.

Number of artists to which average Spotify user listens

Number of artists to which average Spotify user listens

Source: Spotify

This seems to chime with an increase in the number of hours spent listening to Spotify, which increased 25% over the same period.

Average listening hours on Spotify

Average listening hours on Spotify

Source: Spotify

Goodwater Capital report, calling upon official data, that the average Spotify user was listening to 25 hours of content per month in the last quarter of 2017. This seems to be on the up, with users listening to more and more music and other audio content on Spotify. This represents an increase of nearly a third since 2015.

Average content hours per Spotify MAU

Average content hours per Spotify MAU

Source: Goodwater Capital 

The same source indicates that 44% of these monthly-active users use Spotify on a daily basis.

Spotify content

Spotify may be the world’s biggest steaming service, but it does not boast the largest music repository. That accolade must go to Apple Music, which boasts no fewer than 10 million tracks more than its rival service at the time of this graphic. Spotify has recently upped its count of the number of available tracks to 40 million +. Pandora lags behind at 30 million.

Number of songs on Spotify vs. rival platforms

Number of songs on Spotify vs. rival platforms

Source: Goodwater Capital 

Most streamed on Spotify

In May 2018, the Seeb remix of Mike Posner’s “I Took A Pill In Ibiza” became the 10th song to surpass one billion streams of Spotify. The first was Drake, WizKid and Kyla”s “One Dance” in December 2016.

This is the whole 1 billion club as May 2018.

Ed Sheeran – “Shape of You”

Drake – “One Dance (ft. WizKid and Kyla)”

The Chainsmokers – “Closer (ft. Halsey)”

Major Lazer – “Lean On (ft. DJ Snake and MØ)”

Ed Sheeran – “Thinking Out Loud”

Justin Bieber – “Sorry”

Luis Fonsi and Daddy Yankee – “Despacito (ft. Justin Bieber)”

Justin Bieber – “Love Yourself”

The Chainsmokers – “Don’t Let Me Down (ft. Daya)”

Mike Posner – “I Took A Pill In Ibiza” (Seeb Remix)

Most streamed artists by year

Spotify most-played lists tend to be dominated by the same handful of artists. Looking at the last five full years, we see that the most-played artist of the year has turned into something of an arms race between Drake and Ed Sheeran. When the 2019 stats are in, it would be no great surprise to see one of these two names at the top of the pile once again. Drake topped the list in 2018 once more, with 8.2 billion streams. His “God’s Plan” was the most-streamed song, and Scorpion the most-streamed album.

That said, musical tastes are a changeable thing, and around the middle of the 2018, Colombian artist J. Balvin had actually edged in front. He finished the year in fourth place, with Post Malone and XXXTENTACION overtaking him. 2018 was a relatively poor year for Sheeran, who only managed to be the fifth most streamed artist.

Ariana Grande was the top female artist, followed by Dua Lipa, Cardi B, Taylor Swift, and Camila Cabello. No female artist made it into the overall top five.

Year Artist Total streams
2018 Drake 8.2 billion
2017 Ed Sheeran 6.3 billion
2016 Drake 7.4 billion
2015 Drake 1.8 billion
2014 Ed Sheeran 860 million
2013 Macklemore & Ryan Lewis /

Imagine Dragons were the top group, followed by Korean boyband juggernaut BTS. German-language chatshow podcast Fest und Flauschig topped the podcast charts, while crime & mystery was podcast listeners’ favourite genre.

Spotify also reported that Toto’s “Africa” was the top ‘throwback’ song – as anyone who has been anywhere near the internet in the past five year will be able to tell you.

Spotify most-played 2018

Spotify 2018 most played infographic

Source: Spotify

Spotify has also created the following map, which allows you to view the songs that are most popular in a range of cities compared relatively to anywhere else across the world right now – with the goal of finding the distinctive sound of the city. The map is updated on a weekly basis.

All-time Spotify stats

Spotify marked its 10th anniversary in 2018, and accordingly released some stats about the most-played songs over the course of its decade of existence. While Ed Sheeran took most-played song with “Shape of You”, Drake tops the overall most-streamed artist list.

Aside from these two big hitters, the top 10 features other notable titans of the music industry, including Rihanna (who along with Ariana Grande represent the only female artists on this list), Coldplay, and Kanye West.

Some less well-known names creep into the top tracks, proving there is life beyond the marquee artists. In total, nearly 17 million years-worth of music was streamed over the first 10 years of Spotify

Top tracks first-10 years of Spotify

Spotify 10 years top tracks and artists

Source: Spotify

When it comes to the most-followed artists, Sheeran again takes it, with 28.5 million followers – which would qualify as one of the world’s 50 most-populous countries. Rihanna is second on 25.1 million, and Justin Bieber comes third by virtue of his 23.8 million fans. Drake only manages fourth place in this particular list.

Spotify as a soundtrack

The following graphic shows where and when Americans were listening to Bonnie Tyler’s karaoke favourite “Total Eclipse of the Heart” during the solar eclipse of August 2017. With peak listenership roughly following the “path of totality” – where the moon was blocking out the sun – we can certainly see that Spotify users have a sense of occasion.

Total Eclipse of the Heart plays during Eclipse

Source: Spotify

Viewers of the football/soccer World Cup 2018 also were found to soundtrack pivotal moments from the tournament with their sporting anthems.

According to Spotify data, streams of “Cielito Lindo”, an unofficial Mexican football anthem, increased by 1,854% after the national team’s historic victory over then defending champions Germany. While that figure may be staggering, streams of “Gangnam Style” went up by no less than 2190% after they also deposed the winners of 2014.

It’s not just bombastic songs tied in with national identity that spiked during the World Cup 2018. Streams of Queen’s “We are the Champions” increased by nearly 300% in Belgium after they knocked out joint favourites Brazil, leaving no room for doubt over the prevailing national sentiment at the time. On the other hand, when by then highly-feared Belgians were narrowly knocked out by France, the latter turned to disco hit “I Will Survive” – which spiked by 800%.

Anyone who spent any time at all in England during 2018 World Cup will be able to relate to the following graphic, that measures listens to national football anthem “Three Lions” over the day in which England defeated Colombia in a penalty shootout.

England vs. Colombia – Spotify streams of “Three Lions”

Three Lions plays England vs. Colombia

Source: Spotify

Spotify playlists

Playlists are the backbone of how content is consumed on Spotify. Around a third of Spotify listening time is spent listening to Spotify-curated playlists. Slightly more than half of that amount goes on playlists personalised to each listener based on their listening history.

Just over another third goes on listening to user-generated playlists.

Percentage of time spent listening to Spotify playlists

Time spent listening to playlists on Spotify

Source: Goodwater Capital 

Inclusion on a Spotify playlist can make or break an artist’s career. A study conducted by the University of Minnesota and European Commission Joint Research Centre found that inclusion on Spotify’s “Today’s Top Hits” playlists, with around 20 million followers, increases streams by close 20 million. In financial terms this is worth $116,000-$163,000 to an artist. Artists have even found themselves catapulted up the Billboard Hot 100 by virtue of inclusion on a playlist.

Inclusion on the “New Music Friday” playlist was also found to substantially increase the likelihood that a song would be successful – even for unknown artists. Artists, of course, are more than aware of this; accordingly, Spotify’s vice president of content reports receiving thousands of emails a day from artists looking to be included on one of Spotify’s influential playlists – indeed, artists have even began to email his children asking them to petition their father to include them on one of these playlists.

The aforementioned playlists are not the only ones for which artists are vying for inclusion. The “RapCaviar” playlist, for example, has been noted as being particularly influential. Formerly curated by ex-MTV Tuma Basa, the playlist has over 10 million followers, and has even spawned a series of arena tours headlines by members of the hip-hop aristocracy such as Migos and Chance the Rapper.

Not too far behind RapCaviar is “¡Viva Latino!” with 9 million followers, which as the name suggests is targeted at a Latin American audience, and which also aims to bring the music of the region to the rest of the world. It was, however, on “Baila Reggaeton”, with a little under 9 million followers, that you would have found a certain “Despacito” featuring on the very first day of its release, as well as J. Balvin’s “Mi Gente”.

The structure goes a lot deeper. Spotify has a “pyramid” of around 500 Latin playlists, through which songs usually must work their way before reaching the pinnacle of ¡Viva Latino!  

While it commands nowhere near the legion of followers of RapCaviar or ¡Viva Latino!, the “Hipster International” playlist, curated by Napster creator Sean Parker is credited with launching the career of Kiwi artist Lorde, who has gone on to become one of the world’s biggest musicians. The power of the Spotify playlist cannot be understated.

In 2017, Spotify was accused of peppering mood-based playlists with fake artists, that had hundreds of thousands of plays, yet seemingly no other presence. A strong denial was issued, with an investigation by The Verge reporting that the music was largely composed by small artists working under aliases, many working for small labels that collaborate with Spotify.

Spotify playlists: content vs. context

Marrying the two above discussions, Spotify is known to create playlists based on both content and context. So, while many playlists are based around a certain genre or period of music, others are curated to fit in with events, activities, or other contexts that might call for a curated playlist of music.

An analysis by Chartmetric of Spotify’s “Genres and Moods” category of playlists (thus including both types of playlist) shows that in terms of sheer volume, we find a greater number of followers for content rather than context-based playlists. Perhaps this is logical, as music listeners perhaps find these playlists easier to navigate based on their tastes. It is in this category that we find the big-name Spotify playlists mentioned above, as well as a whole host of smaller niche lists.

Content vs. context playlists on Spotify

Spotify context vs. content playlists

Source: Chartmetric

If we look at them in terms of followers, however, we can see that context-based playlists seem to boast a far higher median follower count. Interestingly, though, both are outstripped by hybrid playlists, which are considered to take a little from each category (think “Latin Dance Cardio” or “Dance Party”).

Followers of content and context playlists on Spotify

Followers of content and context playlists on Spotify

Source: Charmetric

This is also borne out if we look at these playlists in terms of growth. Hybrid Spotify playlists outstrip content and context-based playlists in terms of both median and mean average growth. Taking them out of the equation, we see that content-based Spotify playlists boast a higher median follower gain, but a lower mean follower gain than context-based Spotify playlists. This reveals, then, that a concentration of highly-followed context playlists account for a significant share of followers. Followers of content-based playlists are more evenly spread out across the sample.

Content and context playlists on Spotify: Follower gain

Followers of content and context playlists on Spotify

Source: Charmetric

The Spotify algorithm

One of Spotify’s most-loved features is the user-specific playlists generated at first weekly and now daily for each listener, based on their listening history. The Spotify algorithm serves users tracks based on their crossover with other listeners’ histories, natural language processing (scouring the internet to look at terms associated with any given track or artist), and raw audio models, which are analysed using “convolutional neural networks”.

It’s complex and mysterious in its specific workings, but users are known to comment on the sometimes-disarming accuracy with which the Spotify algorithm, can identify new tracks and artists that any given user will love.

Below is an example of a “taste profile” of Quartz writer Adam Pasick, and an illustrative map showing how these focus areas are generated.

Spotify taste profile

Spotify taste profile

Source: Quartz

Spotify taste profile map

Spotify taste profile map

Source: Quartz

Mainstream and alternative listening on Spotify

Ajay Kalia, Spotify’s product owner for taste profiles conducted research in 2015 on how listeners’ tastes change as they age. He found that between the ages of 14 and 35, our taste slowly moves away from the mainstream (that is artists who are more popular). After this point, it tends to stay fixed at a certain point, with a slight dip back towards more popular songs perceived at around 42.

Spotify taste by age

Spotify taste by age

Source: Skynet and Ebert

If we separate the results into male and female listeners, we see that female listeners tend to remain closer to the mainstream overall, and hit peak divergence a little older – at 42, with a few more lurches in and out. Male listeners, on the other hand, seem to stick at around the same level from their early 30s, perhaps indicative of more entrenched listening habits.

Spotify taste by age and gender

Spotify taste by age and gender

Source: Skynet and Ebert

Kalia also found that those who are parents tend to diverge further from the mainstream, and continue to move further and further away from popular artists as they get older. Perhaps to ensure that their children will never find them cool…

Spotify user satisfaction

Spotify is well out in front when it comes to user satisfaction. Using the NPS scale – which measures how likely a customer is to recommend a product or service – Spotify consistently scored in the 20s over the last three quarters of 2017. Apple, on the other hand, did not manage more than a 5, while Google Play Music was in negative figures. This survey only looked at US users.

Spotify user satisfaction

Spotify user satisfaction

Source: Goodwater Capital 

Spotify’s lead is even stronger among users under the age of 30. The younger demographic consistently give a more positive score across platforms, apart from Pandora, which seems to score very well with over-30s. Perhaps we might take from this that those who have experience with physical media are still a touch sceptical about streaming music.

Spotify user satisfaction by age

Spotify user satisfaction by age

Source: Goodwater Capital 

Spotify devices

Breaking down streaming services by operating system gives some unsurprising results. iOS users are more likely to have used Apple Music, while Android users are more likely to have used Google Play Music. Aside from that there’s not a great deal in it – expect when it comes to Spotify, which seems to be (or have been in the last three quarters of 2017 by US users) a good deal more popular with iOS users.

iOS users steaming services used in three months preceding survey

iOS Spotify usage

Source: Goodwater Capital 

Android users steaming services used in three months preceding survey

Android users steaming services used in three months preceding survey

Source: Goodwater Capital 

In the US, Spotify has among the greatest reach of any app on mobile, with around one-in-five mobile users reporting using it. While Apple Music (26%) and Netflix (27%) enjoy slightly higher reach, Spotify has greater reach than Amazon Prime Video (11%) and Google Play Music (11%).

Most popular mobile apps in US by reach

Most popular mobile apps in US by reach

Source: Statista

Spotify Revenue Statistics

In Q3 2018, Spotify revenue stood at €1.35 billion ($1.5 billion). This represents a 6% increase on the €1.27 billion ($1.4 billion) reported in Q3 2018, and a 49% increase year on year.

Gross profit stood at €342 million ($386 million), with a margin of around 25%. This is down from the 26% Spotify profit margin reported in Q2 2018, though gross profit is up from €329 million ($370 million). The margin is well up on the 23% reported a year previously.

The metric on which we’ve really seen improvement, however, is operating loss. Spotify’s losses stood at a mere €6 million ($7 million) in Q3 – down from €90 million ($101 million) in Q2 and €73 million ($82 million) in Q3 2017. In percentage terms, that’s a 93% improvement quarter-by-quarter, and a 92% year-on-year.

In Q4, Spotify revenue is predicted to come in at around €1.35-1.55 billion ($1.5-$1.7 billion), with the operating loss potentially creeping over the line to become profit. Gross margin is set to decrease as a result of a partnership with Google Home, which will see Spotify giving away smart speakers to its Premium members.

Spotify warns that these predictions are subject to a large degree of uncertainty.

Spotify Premium vs. ads revenue

Of Spotify’s revenue in Q3 2018, €1.21 billion ($1.35 billion) came from Premium subscribers, while ad-supported users generated €142 million ($160 million) – showing just how reliant on the subscriptions Spotify’s business model is.

Spotify artists and labels payments

Spotify pays out around 52% of revenue to record labels, who would then pay their artists anywhere from 15% to 50% of that, depending on their status.

As of September 2018, however, Spotify offers a service to artists who want to directly upload music to Spotify. They would then receive 50% of the net revenue generated.

Over 85% of music streamed from Spotify belongs to four record labels: Sony, Universal, Warner, and Merlin (Merlin is actually a licensing agency for independent labels). In 2017 Spotify singed a deal to pay a minimum of $2 billion to two undisclosed labels (thought to be Universal and Merlin) in order to be able to negotiate better rates for itself.

In February 2018, Spotify announced it had paid out close to $10 billion in royalties over the course of its existence.

Despite the size of this figure, Spotify has attracted a good deal of criticism over the years of its existence for the paltry sums paid out to artists. A stream is worth about $0.006 to 0.0084 to an artist, meaning a million streams would translate as $7,000. Given most artists would struggle to make a living from such rates, it’s clear that Spotify’s model does not take artist income into account.

Radiohead’s Thom Yorke and Taylor Swift are among the artists who have criticised Spotify for this in the past. Swift went so far as to remove her music from the platform, though returned a few years later after her 1989 album surpassed 10 million sales. Yorke poetically called Spotify “the last desperate fart of a dying corpse”, and criticised its role as tastemaker, saying that it worked against smaller artists seeking a breakthrough.

Spotify label share value

In order to get Spotify off the ground initially, shares in the company were given to the aforementioned labels, plus EMI.

Labels’ initial shares in Spotify

Labels’ initial shares in Spotify

Source: Music Business Worldwide

In April 2018, Sony sold half of its stock in Spotify, worth a 6% of the company, for $750 million, promising to pay out proceeds to artists. Warner was not far behind in selling $400 million of stock – around 75% of its total equity, making a similar promise to distribute the money to recording artists. Merlin sold its entire stock the same month for an undisclosed sum, thought to be between $130 and $150 million.

 

Spotify revenue and gross profit per user

Goodwater Capital took a look at the average amount of revenue generated by each Spotify subscriber and compared it with the ARPU brought in by Netflix.

In this metric, Spotify compares unfavourably with its video streaming rival, with a gap that seems to be increasing with time.

Spotify revenue per subscriber vs. Netflix

Spotify revenue per subscriber vs. Netflix

Source: Goodwater Capital 

It’s a similar story when looking at the average gross profit generated by each subscriber. Spotify has managed to prevent this declining to the same extent as revenue. Netflix seems to have taken savvy decisions in recent years in this regard, however, so we still see an increasing chasm. Pandora has also been included for comparison here, though it cannot compete with either of its better-known international rivals.

Spotify gross profit per user

Spotify gross profit per user

Source: Goodwater Capital 

It won’t be news to those who follow the music business that streaming has come to be the dominant medium through which music is consumed – overtaking physical records as a revenue source for the music industry in April 2018. Despite streaming’s pirate roots, streaming is now also the dominant channel through which revenue is generated for recorded music.

Indeed, with the subscription model gradually taking hold, revenue is slowly climbing year on year – though to nowhere near the now stratospheric-seeming levels known when physical media was dominant.

In 2017, Spotify accounted for $5.1 billion of the $17.3 billion generated by the recorded music industry, with a further $6.9 billion coming from other streaming. In all, Spotify accounted for 42% of streaming revenue (total $12 billion), and 30% of the total music market.

Spotify/streaming share of global music market revenue

Spotify gross profit per user

Source: Goodwater Capital

Spotify market cap

Spotify went public in April 2018, listing on the New York Stock Exchange, opting for a direct listing instead of the standard IPO process.

The opening price of Spotify shares was $165.90, up on the guide price of $132. The day closed with stock priced at a shade under $150, giving Spotify a valuation of $26.5 billion.

Spotify stock price has been fairly tumultuous since then, rising to a high of $198.88 in July, but coming down fairly hard from late September onwards, with a price $138 reported in late November.

Overall valuation is not too far below that first day, with a market cap of around $25 billion. It had, however, reached the dizzy heights of $35 billion in those heady days of July. It is thought in the financial services sector, however, that we can expect Spotify stock to once more ascend in value.

Spotify stock price history

Spotify stock price history

Source: Yahoo Finance

Final Thoughts

Spotify can be considered, along with Netflix, to be one of the key drivers of effecting a sea change in the way we consume culture. Before, we would pay for each individual film or album (or even song), which would then be in our possession for as long as we took care of it.

That model would probably seem hopelessly antiquated to anyone coming of age in the second decade of the 21st century. The access model – whereby we pay for unlimited access to as many different works as we can consume, so long as we keep paying our monthly rate – is now clearly the dominant form of consumption.

There is a question, though, which separates Netflix and Spotify. The film industry seems to be in rude health. And importantly, Netflix is investing in the creation of original content – giving something back to the art form through which it rose to prominence.

Music, on the other hand, is a form which has hugely suffered from the move away from physical media. Certainly, grandee artists can get by on the strength of arena performances, licensing, and lucrative deals with record labels – raking in a little bit extra from streaming. For emerging artists, however, Spotify is the harbinger of a problematic shift in the way the business operates. They cannot rely on ticket sales to the same extent, and certainly cannot expect to make a living from streaming revenue.

To this we can add the issue of Spotify operating as a tastemaker – given the huge listenership attracted by its playlists and the influence of its algorithms. While commercial radio played a huge role in determining which artists made it and which didn’t make it to the big time, perhaps the idea that something as highly-valued as pop music is in the hands of a global tech juggernaut is problematic for many aficionados as well as artists.

How the music industry and Spotify learn to work together will be on the key things which observers will be watching in years to come. The other, of course, will be the rise of Apple Music as a key rival. Apple are not a company any sane business would want as a competitor. It remains to be seen whether Spotify can maintain the healthy lead it has – particularly given its somewhat tempestuous experience as a publicly-listed company so far.

While we should by no means turn away from these issues, we should also note, however, how wonderful it is as users to have access to something like Spotify. Listeners have access to nearly the entire mainstream Western canon of music (and much from beyond it) available at a few clicks, in high quality. For all but seekers of rare obscurities, there’s enough music on Spotify to comfortably last the rest of any given user’s life. This was totally unimaginable 20 years ago.

And let’s not also forget that Spotify saw off the challenge posed by illegal downloading to the music industry. While musicians have certainly been hurt, we’ve managed to find a compromise where people are at least willing to part with some money to listen to their work. That is a start at the very least.