Spotify Success Story: How it Brings Music for Everyone?

Like they say there's a song for every mood, but in a practical sense, it is not possible to have such a large number of songs stored on any device. Spotify perfectly solves this problem. Spotify is an international online and offline music streaming and media services provider, headquartered in Stockholm, Sweden. Founded in April 2006, which is the Spotify creation date, Spotify is the world's largest music streaming service provider. In India, Spotify is the largest audio streaming platform among international players. So, let's have a look at the Spotify success story, where we will also learn about Spotify, the Founders of the app or the Spotify creator, the Fundings it received, Spotify Business Model, Revenue Model, Acquisitions, Challenges and discuss how it gained the immense popularity it enjoys among the music lovers globally.

Spotify - Company Highlights

About Spotify
Spotify - Industry
Spotify - Startup Story | History
Spotify - Founders and Team
Spotify - Name, Tagline and Logo
Spotify - Mission and Vision
Spotify - Business Model and Revenue Model
Spotify - Funding and Investors
Spotify - Shareholding
Spotify - Acquisitions
Spotify - Investment
Spotify - Partnerships
Spotify - Challenges and Controversies
Spotify - Growth
Spotify - Products and Services
Spotify - Future Plans

About Spotify

Spotify began its journey in the year 2006, which was the start of Spotify, and since then, it has been serving a platter of podcasts, videos, and music to its customers. Founded by Daniel Ek and Martin Lorentzon, Spotify is a Swedish audio streaming and music service provider. Headquartered in Stockholm, Sweden, Spotify brings a wide selection consisting of more than 70 million songs from an array of diverse record labels and media companies. As the company brings digital, copyright-protected podcasts and musical content to its users, it helps them enjoy the basic features and access limited contents that are distinguished for the advertisements in them as freemium. However, Spotify also brings affordable subscriptions for the users, which helps them access its treasure trove of content, add-free.        

The core business of the company lies in music or audio streaming. Although Spotify was founded in 2006, it was launched 2 years later in the year 2008. One of the main reasons for the commercial success of the Spotify business is that it provides a good list of search variables where the users can type the song, artist, album, or genre on the search bar and then hit go, THAT'S IT. Spotify enjoys a huge cheering section of about 381 million active users (monthly), of which 172 million are premium users as of September 2021.

A user can use Spotify in two modes i.e, online and offline. For offline mode, a premium membership is needed with which you get access to download from Spotify's collection of 13 million+ songs. However, for the online mode, the internet connection is a prerequisite and premium membership is not needed. Spotify App is available both for mobile and desktop, so you can just sign in to spotify.com and start listening if you don't want to go with the app.

Spotify also introduced "Spotify for Artists" a platform to provide artists and their teams with audience statistics and various tools to promote their music and manage their profiles on Spotify. From promoting their shows to selling artist-branded merchandise, Spotify for Artists is a great platform for artists.

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Spotify - Industry

The market size of the music streaming industry across the globe was last reported to be around $20.9 bn in 2019. This was estimated to be going up at a CAGR of 17.8% from 2020 to 2027. This rapid growth of the industry of music and online streaming of music is expected to expand due to the increasing adoption of smartphones and rapid digitalization coupled with the growth of digital platforms. Here, Spotify was reported to have a market share of more than 32%, as of November 2021's reports.

Spotify - Startup Story | History

Spotify was founded by Daniel Ek and Martin Lorentzon as a way to deal with the problem of music piracy. Before the music streaming services got popular, there were many who downloaded pirated music files. This was a growing challenge for the whole music industry and is the base of Spotify history. Daniel and Martin realized that music streaming has a huge potential, which made them start Spotify startup in 2006.

The name 'Spotify' came to the founders just by chance. It was when Daniel and Martin were yelling out some possible names for their music streaming business that Daniel misheard the name 'Spotify'. Spotify name meaning was later summed up as a combination of two words "Spot" and "Identify".

Spotify's services were publicly released (by invitation only) for the first time on 7 October 2008, in Scandinavia, the United Kingdom, France, and Spain. In 2009, Spotify started offering free but limited access to its services in the UK. As of today, Spotify is operational in over 180 countries and is working towards entering many more new territories, when last reported in October 2021.

Spotify - Founders and Team

Spotify has been founded by Daniel Ek and Martin Lorentzon.

The Spotify founders' story is quite an interesting one.

Daniel Ek

Spotify founder Daniel Ek is currently the Chairman and CEO of Spotify. Ek started his entrepreneurship when he was just 13! He used to design websites for his clients. Daniel Ek worked in a senior role at an online commerce company, Tradera. After Tradera he served as CTO of Stardoll ( a browser-based game and fashion community). He later started an advertising company Advertigo which was sold in 2006. After this, Daniel worked as the CEO of μTorrent (BitTorrent download client on desktops) for some time before starting up Spotify.

Martin Lorentzon

Spotify co-founder Martin Lorentzon initially began with an internship in Telia (a Swedish Multinational Telephone Company) and was later shifted to San-Francisco where he joined AltaVista (one of the early search engines that were later purchased by Yahoo). There he met web entrepreneurs and landed a job in Cell Ventures, an investing company. Martin went on to co-found Netstrategy in 1999, which later came to be known as Tradedoubler - a leading European Marketplace. Tradedoubler bought Daniel Ek's advertising company Advertigo in March 2006, and this is when Daniel and Martin came to know each other.

Spotify operates globally with a team between 5,000 - 10,000 employees.

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Spotify - Name, Tagline and Logo

The naming of Spotify has a really interesting backstory. As shared by one of the creators of Spotify, who is also the CEO of the company, Daniel Ek, the naming of Spotify was decided when Daniel and Martin stayed at a flat in the suburbs of Stockholm. The founders of Spotify were sitting in different rooms one day, and exchanging different naming ideas of the brand, shouting them back and forth. Then, Martin shouted a brand name to Daniel, which was misheard by the later as "Spotify". As soon as he heard the name, or rather misheard it, Daniel googled the same, and finding no matches or hits for Spotify on Google, they registered the same for their company immediately. However, the founders are often embarrassed to disclose this story behind the naming of the popular music streaming app and generally weaves in the after construction that the name of Spotify is a portmanteau of "Spot" and "Identify".            

Spotify is fueled with the tagline "Music for Everyone."

Spotify - Mission and Vision

Spotify claims that its mission is "to unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it."

Spotify's vision revolves around extending a cultural platform where the professional creators can break free of their medium constraints and can thereby enjoy an immersive artistic experience.  

Spotify - Business Model and Revenue Model

Spotify works on a "freemium" business model. According to this model, there are certain services that are free while the other services are paid. The source of revenue for Spotify is the premium subscription for paid services. It also earns revenue by selling ad space on its non-premium streaming service.

Other than paying the artists, Spotify also pays the rightsholder of any song anything between $0.006 to $0.0084 per play ( according to 2018 reports).

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Spotify - Funding and Investors

Spotify has raised a significant amount of $2.1 billion to date (February, 2023). It has witnessed over 19 funding rounds and the last funding round was a Post-IPO round, which came in on February 10, 2023. There are 3 lead investors for the company.

Below are details of funding raised by Spotify -

Spotify - Shareholding

Several distinct parties jointly own Spotify. Martin Lorentzon, who as of January 3, 2023, owned 10.9% of Spotify's total shares, and Daniel Ek, who owns 7.3% of the total shares, collectively hold the majority of the company's stock. Investment corporation Baillie Gifford & Co., which owns a 14.5% stake in the business, is the company's largest institutional stakeholder.

T. Rowe Price and Morgan Stanley are two more significant institutional shareholders, each holding a 6.18% and 3.66% interest respectively. Other institutional and private investors in the business include Tencent, which is the owner of 8.61% of the company's shares, and Sony Group Corporation, which is the owner of 2.65% of the company's shares.

Spotify - Acquisitions

• In 2013 Spotify acquired Swedish music discovery app Tunigo
• In 2014 it acquires music tech company The Echo Nest
• 2015 Spotify acquired Seed Scientific, which is a data science consulting firm.
• In 2016 Spotify acquired two companies within a day. The companies are Soundwave (music discovery startup) and Cord Project (audio messaging apps building startup)
• In 2016 it acquired photo startup Crowd Album.
• In 2016 again, Preact was acquired. Preact is a startup that helps businesses acquire and retain subscribers.
• In 2017 Spotify acquires Sonalytic, a United Kingdom-based audio detection startup
• In 2017 Spotify also acquired content recommendation service MightyTV.
• Spotify acquired blockchain startup Mediachain Labs in 2017, in order to solve music's attribution issue.
• In 2017 Spotify acquires Niland, a Paris-based  AI startup, to improvise its music personalization and recommendations feature.
• In 2017 it gets Stockholm-based online music studio Soundtrap
• In 2018 Spotify acquired Loudr, San Francisco-based licensing startup. This acquisition will help Spotify to identify, track and pay royalties to music publishers.
• Spotify acquired SoundBetter, a music production marketplace that connects artists, producers, and musicians.
• In 2019 Spotify acquired podcasting studio Parcast.
• In 2019 Spotify acquired Anchor, an online platform that lets users create and distribute podcast content.
• In 2019 Gimlet Media was acquired by Spotify. Gimlet is a podcasting startup.
• In 2020, Spotify acquired The Ringer, a leading creator of sports, entertainment, and pop culture content. With this acquisition, Spotify is all set to expand its sports and entertainment offerings.
• In 2020 Spotify acquired Megaphone (formerly Panoply Media) for $235 Million. Megaphone is also a podcast hosting company. they definitely want to take over the Podcast market.

Here's taking a better look at some of the recent Spotify acquisitions:

Spotify - Investment

Spotify has invested in three companies to date.

Below are the details:

Spotify - Partnerships

Spotify frequently teams up with companies and organizations from around the world to help see an increase in its user counts. The music streaming giant has partnered with over 47 companies to date where 20 of these partners are channel partners and 27 of them are technology partners. Among the biggest of the Spotify partners are Slack, Salesforce, and wufoo.  

Calm

On July 18, 2023, Spotify and Calm entered into a relationship with the goal of delivering a variety of calming material from Calm to support people on their mental health journeys.

Open AI

Spotify and Open AI announced a partnership on February 23, 2023. With this partnership, Spotify has created a new AI-powered service called DI to provide the music streaming service with better personalization features.

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Spotify - Challenges and Controversies

Spotify is facing opposition from many artists, who see the platform as an 'unwanted middleman'. Artists like Thom Yorke, Johnny Marr, and David Byrne have been vocal against Spotify. While some artists feel that the payouts they receive from Spotify are inadequate, some others feel that the platform is not supportive enough for emerging artists and the Spotify team is trying to deal with this effectively. In 2013 Spotify launched 'Spotify for Artists' which is an attempt to clarify its business model to the artists and help the artists create a fanbase and earn great revenues as well.

Besides experts holds that making money from the streaming business is not an easy task. From paying royalties to artists to other costs involved it is tough to turn profitable, and Spotify despite its popularity has incurred many losses. However, with the increase in the paid customer base, Spotify will be able to deal with it better. As per a 2019 report, Spotify has turned profitable only thrice since its inception.

Another challenge for Spotify is the competition that it is facing from competitors like Apple Music and Amazon Music Unlimited.

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Spotify - Growth

• According to Spotify's 2020 Q1 report, the platform has 286 million monthly active users, of which 130 million are Spotify premium subscribers.
• Spotify witnessed a 29.0% year-on-year growth in paid subscribers in 2019
• In 2019, Spotify  reported revenue  worth €6.764 billion (around $7.44 billion)
• Spotify occupied a market share of over 32% in the global streaming market in November 2021
• Spotify market cap in early May 2020 was $26.9 billion
• Spotify is now available across devices and diverse Operating Systems
• The app is currently available in over 184 markets
• Spotify has last been known to be operational in 180+ countries, as reported in October 2021
• The app boasted of having 381 million monthly active users, which includes 172 million paying subscribers, when last reported in September 2021
• 13,000 out of 7 million artists on Spotify, reportedly generated around $50,000 and even more in payments in 2020

Financials

Operating revenue for Spotify grew from Rs 0.34 crore  in FY21 to  Rs 16.12 crore in FY22. In terms of company profit/loss, the company went from Rs 44.25 crore in FY21 to Rs 156.46 crore in FY22.

Spotify - Products and Services

Free Spotify Service

In India in October 2023, Spotify had  restricted access to a few important features for free users. Only premium subscribers will have access to it, and users won't be able to play songs in a particular order, replay songs, or go back to their prior tracks or features.

Audiobooks

As part of a larger push into the market, Spotify Technology SA is providing 15 hours of audiobook listening for free each month to its premium users in the UK and Australia as per news report of October, 2023. Spotify Audiobook was launched in September 2022.

Daylist Feature

The Daylist feature that Spotify has introduced allows users to customize according to their emotions or moods on September 12, 2023. Depending on the users' previous listening patterns during the day, the Daylist will be updated.

Spotify - Future Plans

The Spotify team looks forward to increasing their active users monthly and also at growing the number of their premium subscribers. "Our goal (is to become) the world's No. 1 audio platform," says Daniel Ek, CEO of Spotify.

According to a news article from October 9, 2023, Spotify is going to offer a Super premium service with lossless music, AI playlists, enhanced mixing capabilities, and more.

Spotify will test out Voice Translation as per news report of September, 2023, an innovative AI-powered function that converts podcasts into multiple languages while preserving the podcaster's voice. In order to mimic the original speaker's manner, this Spotify-developed tool makes use of the most recent technological advancements, including OpenAI's just-released voice generation technology.

Frequently Asked Questions - FAQs

Is Spotify free now?

Yes, there is a free version available but with limited features and frequent ads. However, the content is the same. With the premium version, on the other hand, you get access to all the content and all of its features.

How do I listen to Spotify without downloading it?

You can access Spotify through their website on your desktop if you do not want to download their app. Signing up is free!

Can I download songs from Spotify?

Yes, absolutely! You can download songs playlists or podcasts from Spotify if you have the premium plan and listen to music offline. However, as soon as your premium version expires you will lose access to the songs playlists, or podcasts.

How long is Spotify free?

Spotify Free lets you listen to music, but you have to listen to advertisements as well. After six months of use, you get a time limit of 10 hours per month.

Can you listen to Spotify without WIFI?

Yes, if you have the premium version you can listen to Spotify offline without WIFI as long as you have downloaded the tracks or podcasts previously.

How many devices can use Spotify?

Spotify allows premium users to install the application on as many devices as they like. However, you can only stream music on one device at a time.

Who owns Spotify app?

The Spotify app is owned by Spotify Technology S.A.

When was Spotify created in US?

Spotify was created in US in 2006.