Spotify: A Beat for Everyone

Like they say there's a song for every mood, but practically it is not possible to have such a large number of songs stored in any device. Spotify perfectly spots in as a solution to this problem. Spotify is an international online and offline music streaming and media services provider headquartered in Stockholm, Sweden. In India Spotify is the largest audio streaming platform among the international players and has around 15% market share as per reports. Let's have a look at the startup journey of this startup which has gained immense popularity among the music lovers globally.

Spotify - Company Highlights

Company Name Spotify
Headquarter Stockholm, Sweden
Sector Music Streaming and Media Service Provider
Founders Daniel Ek, Martin Lorentzon
Founded April, 2006
Parent Organization Spotify Technology S.A.

About Spotify
Spotify - History
Spotify - Founders
Spotify - Business Model and Revenue Model
Spotify - Funding and Investors
Spotify - Acquisitions
Spotify - Challenges and Controversies
Spotify - Growth
Spotify - Future Plans

About Spotify

Spotify began its journey in the year 2006 and since then it has been serving a platter of podcasts, videos, and music to its customers. 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 its commercial success is that it provides a good list of search variables such as 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 286 million active users ( monthly ), of which 130 million are premium users as of 2020.

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. But for the online mode internet connection is a prerequisite and premium membership is not needed. Spotify App is available both for mobile and desktop, besides you can just sign in to 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.

Also Read:  Success Story of Jio - The Company that Revolutionized Telecommunication Industry

Spotify - 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 which was a huge blow for the whole music industry. Daniel and Martin realized that music streaming has a huge potential which made them start Spotify 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'. When they searched the internet they found that the name 'Spotify' was not taken which made them settle on the name 'Spotify'. Spotify is made up 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 UK. As of today, Spotify is operational across 79 countries and is working towards entering many more new territories.

Spotify - Founders

Interestingly Spotify founder and CEO Daniel Ek started his entrepreneurship when he was just 13! , when he use to design websites for his clients. Daniel Ek worked at a senior role at 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.

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 was 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.

As of 31 December 2018, Spotify had 3,651 Employees.

Spotify - Business Model and Revenue Model

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

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

Also Read: 5 Types of Business Model that You Can Follow for High Income

Spotify - Funding and Investors

Spotify has raised a significantly huge amount of $2.6B. It has been through 18 funding rounds and the last funding round was a corporate round which came on Jan 8, 2018. The number of lead investors is 11 whereas the total number of investors is 45.

Below are details of funding raised by Spotify -

Date Stage Amount Investors
January, 2018 Corporate Round - SharesPost Investment Management, EquityZen
December, 2017 Funding Round - Tencent Holdings, SchindlerAM Ventures, Tencent Music
July, 2016 Secondary Market - Manhattan Venture Partners, blisce, Harmony Partners, GP Bullhound
March, 2016 Debt Financing $1 Billion Dragoneer Investment Group, TPG, Vulcan Capital
January, 2016 Convertible Note $500 Million -
January, 2016 Secondary Market -- blisce
August, 2015 Seconadry Market - EquityZen, SharesPost Investment Management
June, 2015 Series G $526 Million Goldman Sachs Investment Partners
April, 2015 Funding Round - Goldman Sachs Investment Partners
November, 2014 Secondary Market - blisce, Groupe Arnault
November, 2012 $100 Million Goldman Sachs Investment Partners
June, 2011 $100 Million
February, 2010 - Founders Fund

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 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 which lets users create and distribute podcast content.
  • In 2019 Gimlet Media was acquired by Spotify. Gimlet is  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.

Spotify - Challenges and Controversies

Spotify is facing opposition from many artists, who sees the platform as an 'unwanted middleman'. Artists like Thom Yorke, Johnny Marr and David Byrne has been vocal against Spotify. While some artists feel that the payouts they receive from Spotify is inadequate, some others feel that the platform is not supportive enough for emerging artists. 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 helping the artists create a fanbase and earn great revenues as well.

Besides experts holds that making money from streaming business is not an easy task. From paying royalties to artists to other other costs involved it is tough to turn profitable, and Spotify despite its popularity has incurred much 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.

Also Read: Facts About Famous Brands You Never Knew

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.
  • In 2019, Spotify  reported revenue  worth €6.764 billion (around $7.44 billion)
  • Spotify occupies a market share of around 36% in the global  streaming market
  • Spotify market cap in early May 2020 was $26.9 billion

Spotify - Future Plans

Spotify is biding high on podcasts. It aims to generate a huge revenue of about $659 million in revenue by 2020 and it is willing to invest the amount extensively into the content creating to just make sure that people get the best to listen. Spotify aims at seeing itself as the default app for podcasts. The music giant further aims at enhancing the user experience. They are still working on what they call the "right exclusivity formula" to be a notch in this realm too.

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 Spotify.

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About Chayanika Goswami

  • Assam
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