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.
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Table of Contents
Key Spotify Statistics
- 217 monthly active Spotify users
- 100 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 Q1 2019 stood at €1.51 billion ($1.68 billion), €1.39 billion ($1.55 billion) of which came from Spotify Premium subscribers
- Gross profit in the same quarter was €373 million ($432 million), with operating loss at €47 million ($53 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 market cap in mid May 2019 was $25 billion – relatively unchanged for at least six months
- Highest market cap to date is $35 billion in July 2018
Spotify User Statistics
There were 217 million monthly active users of Spotify according to the company’s official Q1 2019 report. Of these, 100 million were Spotify Premium subscribers.
This is up from 207 monthly active Spotify users and 96 million Spotify Premium subscribers in Q4 2018. Year-on-year, it’s a 44 million increase in users (25%), and 25 million increase in subscribers (32%) – a growth rate that has been fairly consistent, though shows signs of slowing.
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 mid-2018. Taking a more long-term view, we can see that the percentage has been creeping up over time, despite recent stagnation.
In Q1 2016, it stood at 31%, in Q1 2017 at 39%, and in Q1 2018 at 43%.
Spotify MAUs vs subscribers
Source: Spotify
Spotify anticipates that total monthly users will increase to 222-228 million, and Spotify Premium users to 107-110 million in the second quarter of 2019. By the end of the year, Spotify is hoping to report 245-256 million MAU, and 117-127 Premium subscribers.
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
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. We see a slightly higher preponderance of Spotify Premium subscribers in North America and Europe, perhaps unsurprisingly.
Spotify reports that the fastest growth is occurring in less-established markets such as Latin America and ‘rest of world’ (which encompasses Asia). Indeed, Spotify picked up two million users in India within two months of its February launch there.
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 region
Source: Goodwater Capital
Spotify vs. other music streaming services
In the US, Spotify was overtaken by Apple Music as the biggest subscriber music service in July 2018. Both services reported around 20 million subscribers at the time. Since then, Apple has pulled further ahead, with 28 million US subscribers to Spotify’s 26 million.
Spotify is a global enterprise, however, and, in 2018, 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 some way, with Spotify topping 100 million in Q1 2019, and Apple Music hitting 50 million.
As of April 2019, it is thought that Apple is growing at a slightly faster rate than Spotify (2.4-2.8% compared to 2-2.3% respectively).
Spotify vs. Apple Music global 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
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
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
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
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
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
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
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
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
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
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
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”
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
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
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
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
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
Source: Quartz
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
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
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
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
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
Source: Goodwater Capital
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
Source: Statista
Spotify Revenue Statistics
In Q1 2019, Spotify revenue stood at €1.51 billion ($1.68 billion). This represents a marginal increase on the €1.5 billion ($1.68 billion) reported in Q4 2018, and a more healthy 33% increase year on year.
Spotify gross profit for this quarter stood at €373 million ($418 million), which represents a slight decline on Q4 2018’s €399 million ($448 million) – 7% to be precise. Year-on-year, things look at bit better, with a reported 32% increase on Q1 2018’s €283 ($317 million).
Gross margin, at 24.7%, is down from both Q4 2018’s 26.7% and Q1 2018’s 24.9%.
Where things get really tricky is the operating loss/income. In Q1 2019, Spotify reported a €47 million ($53 million) loss, at a margin of 3.1%, which stacks up badly against the €94 million ($106 million) profit reported the previous quarter (a margin of 6.3%) – and even the €6 million ($7 million) loss in Q3 2018.
These losses have hit shareholder earnings, with earnings per share coming in – €0.79 ($0.88), exceeding even analyst’s predictions of negative EPS of €0.35 ($0.39).
On this note, in November 2018, Spotify announce a plan to repurchase $1 billion of publicly-traded shares. Over this first quarter, it managed to repurchase $138 million worth shares. In all, it has thus far managed to repurchase $255 million shares, at an average cost of around $132 a piece.
A small mercy is that the smaller loss of €41 million ($46 milion) loss of Q1 2018 came at a higher loss margin of 3.6%.
Spotify predicts that revenue will come in at €1.51-1.71 billion in Q2 2018, and €6.35-6.8 billion over the course of the whole year. It seems that a return to profitability is not anticipated, with Spotify losses in the second quarter of 2019 predicted to stand at anywhere between €15 million and €95 million. Total losses for the year are predicted at €180-340 million.
Spotify warns that these predictions are subject to a large degree of uncertainty.
Spotify revenue 2018
Spotify 2018 revenue came to a total of €5.3 billion ($5.9 billion), with gross profit standing at €1.4 billion ($1.6 billion). This compares to revenue of 2018 €4.1 billion ($4.6 billion) in 2017, with gross profit at €849 million ($953 million).
Total losses for the 2018 came to €173 million ($194 million) before tax, which compares very favourably with losses of €1.2 billion in 2017 ($1.3 billion)
In terms of costs, Spotify spent €493 million ($553 million) on R&D, €620 million ($696 million) on sales & marketing, and €283 million ($318 million) on general & administrative. Cost of revenue was €3.9 billion ($4.4 billion).
Spotify Premium vs. ads revenue
Of Spotify’s revenue in Q1 2019, €1.39 billion ($1.56 billion) came from Premium subscribers, while ad-supported users generated €126 million ($141 million) – showing just how reliant on the subscriptions Spotify’s business model is.
Notably the second figure represents a 28% decline on Q4 2018, in which ads brought in €175 million ($196 million) worth of revenue. We might be able to ascribe this to advertisers looking for airtime during the Christmas period, in which Spotify no doubt has come to serve as a solution to soundtracking festive parties.
On the other hand, it also represents a decline on Q3, when the figure stood at €142 million ($159 million).
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
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
Spotify ARPU has been declining – to the chagrin of some invested parties (namely: record labels). Rolling Stone reported in January 2019, that the monthly figure stood at around $5.50/user.
Several factors are at play here. Student/family subscriptions, for example, see discounted rates being applied. Expansion into new territories is another – subscriptions are cheaper in places like Vietnam, to reflect different levels of disposable income. And, of course, there are various offers and deals.
It would not be a surprise, concludes the piece, if we saw global Spotify ARPU fall beneath $5 by the end of 2019.
It’s not a short-term issues. 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, between 2013 and 2017
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
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
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.
2018 saw the fourth consecutive year of growth in the recorded music industry, with total revenue coming to $19.1 billion. 255 million paid streaming listeners were responsible for 37% of this, while the total revenue generated by streaming services accounted for 47%.
No figure is available specifically pertaining to Spotify for 2018, but we do have them for the preceding year. 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
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. This culminated in a low of $104 in December, though we have seen something of recovery since then, with a price $135 reported in mid-May 2019.
Overall valuation is not too far below that first day, with a market cap of around $24 billion. It had, however, reached the dizzy heights of $35 billion in those heady days of July 2018. As of Q3 2018, certain voices in the financial services sector suggested that we might expect Spotify stockto once more ascend in value.
As of May 2019, this has yet to materialise, with Spotify buying back much of its own stock. The closest we came to this was mid-February, which saw Spotify stock priced as high as $152.
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.
