Created on November 14, 2023
A look into spotify's business
Spotify Enterprise Analysis
Customer Base & stats
Popular Spotify Artists
Spotify was co-founded by Daniel Ek and Martin Lorentzon in April 2006, and then it launched in October 2008. It was made as a result of many piracy sites like Napster or Limewire - which was sued by many companies in 2006 and then shut down in 2010. Napster was probably the most well-known for music piracy, leaking music from artists such as Metallica and Madonna. Spotify’s first big success lies in the user account customization that has been available since the very first day. Spotify encourages users to create their own playlists, essentially building an entire library of music on their accounts.Innovative features - Discover weekly was first launched in 2012 under the name 'Discover', and its main goal was to create a playlist with users’ favorite artists using all the data that Spotify had about their listening habits — and taste. this feature matured over time by recommending more songs of a similar genre after all songs of a playlist had been played. This effectively simplified the way users could find and discover new music. This feature finally evolved into today’s Discover Weekly which provides a personalized playlist every week aligned to the users’ taste and which only includes songs that they have not heard before.Spotify Wrapped started in 2015 as 'Your Year in Music', a feature for users to look back through their top music and artists alongside a slideshow with specific statistics about their listening habits. Ever year in early December, Spotify sends each of its subscribers a report based on data gathered about their music consumption in the past year. While it was rather popular, Your Year in Music didn’t quite go viral until it was upgraded two years later to current, fun graphics of Spotify Wrapped. It is also very easy to share results, and was a very smart move by spotify to create a trend and see a peak in app usage.
Spotify had a few flaws in its beginning, mostly that lots of bands and other artists refused to sell their music to the service so they didn't have any appeal to people of certain tastes. For example, The Beatles refused to do this and they have a huge fanbase and following, so there was huge gap in the market. Spotify had a similar loss in their relationship with Taylor Swift. In the business negotiations surrounding the release of “1989,” Swift and her label, Big Machine, told Spotify they only wanted the company’s paid subscribers to have access to her new music. Spotify’s subscription tier pays higher royalty rates to artists than its free tier. Artists like Taylor Swift have criticized Spotify and similar sites in the past for paying low royalty rates. Spotify denied her request to keep her music off its free tier. In response, her label asked to have her entire catalog taken off the site. The decision was a huge blow to Spotify, whose success depends heavily on its ability to provide the new music its listeners crave. Other streaming outlets have retained access to Swift’s catalog by agreeing to her demand to keep her music out of free tiers or only available for a fee.
Spotify has many ways of making money, though their premium payment packages to adverts for their free customers, they have found many small ways of increasing their earnings. In terms of paying their artists, one stream equals to about $0.003 - $0.005 on average, so only artists that are extremely successful manage to break through and live a wealthy lifestyle. That works out as an approximate revenue split of 70/30 - so that’s 70% to the artist/rights holders and 30% to Spotify. It is important to remember that not all of the 70% will go to artist because a lot of people go into the process of making a song/album. If an artist does not do these themselves they have to pay specialists like songwriters, publishers, recording owners, producers etc. and there's also the cost of the studio, rights and more. Spotify recently introduced a feature where an artist can sell their merchandise through the app directly under their artist profile, they can also organise and sell tickets for any tours or gigs coming up. Spotify does not take a cut from sales, but the merch push does serve a business purpose. It is well known how little artists take home from their music streams, and selling merch is an easy, high-margin way to attempt to fix the problem. If Spotify wants to keep artists happy, the company has to make merch part of the user experience.They take a booking fee when people buy ticket for the live eventsSpotify offers 4 different membership packages that vary in price and the perks they offer - Premium individual costs £10.99 a month and gives one premium account, Premium Duo costs £14.99 a month and gives two premium accounts, Premium Family costs £17.99 a month and provides up to 6 accounts, gives access to spotify kids and can block explicit music and Premium student costs £4.99 a month and offers the same perks as the individual package. All of the premium packages include these perks: Ad-free music listening, can download to listen offline, can play songs in any order, high audio quality, listening with friends in real timeand can organise listening queue.
Customer BaseSpotify has a huge customer base, they detail on their website: "We are the world's most popular audio streaming subscription service with more than 574 million users, including 226 million subscribers in more than 180 markets". Their target demographic is largely made up of young adults, both male and female, who are likely to be living with their families. Consumers between the ages of 18-24 years old were 85% more likely than the average user to visit Spotify in January 2023.Stats-As of the first quarter of 2023, Spotify reportedly had 317 million monthly active users, up from 295 million a year earlier, on a free, ad-supported plan.-In 2022, the company generated over 11.7 billion euros in revenue, which was up from 9.67 billion in 2021.-The Spotify platform is accessible in 183 countries. By 2020, its reach expanded to 80+ additional countries, showing that it continues to expand-Females make up 56% of the user base and males make up 44%.-The Top Song of 2022 Was “As It Was” by Harry Styles-Over $7 Billion Was Paid to Spotify Artists in 2021
Customer Baseand Stats
Spotify has grown significantly in recent years, adding many features to their streaming service. I think that one of their most important strides in terms of growth is their passion to help as many people as possible, they have a feature on their website called 'Loud & Clear' which provides all information about how money flows to the artists and the industry. They have stats about different earnings and the amount of artists who recieve amounts similar to each area. They also have a website called 'Time to Play Fair' which details their ongoing feud with apple to make sure that their business is not overtaken by Apple's deceptive pricing and methods to make apple music more readily available and accessible to iphone users.