The revenue earning model of Spotify- an overview

The revenue earning model of Spotify- an overview

Spotify is a popular music streaming platform like Amazon, Apple, and Google. It is a Swedish music streaming service which came into existence in 2008 and has grown in leaps and bounds since the past decade. Spotify has grown considerably since inception and today its income is generated mainly from paid subscriptions and commercial advertisements.  These two business segments are categorized into premium member services and Ad-supported service.

Today, Spotify has a global presence in around 92 countries and boasts of nearly 300 million active users and approximately 150 million premium subscribers.   For music artists and lovers, Spotify is an ideal platform for watching and uploading audio content. This platform has a free service section where users can listen to playlists but the problem is that services here are limited and laced with advertisements.  Premium subscribers have access to unlimited ad-free playlists which enhances the music listening experience. It is seen that nearly 93% of Spotify revenue is generated from premium subscriptions and only 7% from commercial advertisements.

Trends have also shown that Spotify has high retention of its paid users and has been consistently adding new ones by converting them from ad-supported services users to paid premium members. Many Spotify artists have already seen the potential of this platform and do not hesitate to buy Spotify plays from service providers to boost engagement with the vast audience here.

Premium membership services

Spotify allows its music streaming services to be available to both free and paid members. Paid membership services, also known as premium services, offer unlimited access to its playlists, in online and offline mode. The good thing about this service is that one can listen to the playlists without the interruptions of advertisements. The paid services come in various subscription plans and form the bulk of the revenue earned by the playlist.   This revenue is growing consistently thereby indicating its rising popularity among subscribers.

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The free members have access to the Spotify playlists but in a limited manner.  The entire music catalog is not available for free listening and even the limited ones offered for free listening have commercial advertisements in between.

The year 2020 has overall revenues increased by nearly 20% vis a vis 2019.  However, the advertisement revenue declined by 20%, and probably due to the world economy affected by Covid-19.  The company has around 48% of its revenue amounting to 900 million euros combining from three countries i.e.  US, UK, and Luxembourg.  The balance of 52 % of 980 million euros comes from the rest of the world.

The fact that overall revenue grew despite a fall in advertisements shows the rising popularity of this platform among the music audience.  This is a positive sign of signaling further growth in the future. This was reflected in the growth of MAU (Monthly Active Users) and premium subscribers. The quarter2 of the year 2020 saw a growth of nearly 29% and 27% in MAU and  Premium subscribers respectively, compared to the same quarter in the year 2019.  This trend shows the and 27 increasing popularity of the platform despite stiff competition from other music platforms such as Apple, Amazon, and Google. This popularity has not gone unnoticed by digital marketing influencers such as https://spotifystorm.com/ who leverages their client’s visibility through their services.

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