Spotify is the biggest music streaming platform by number of subscribers and is widely known globally.
With such insane popularity and amid tough competitors, you might be wondering if is Spotify profitable.
With a free an premium model, users can access billions of songs and custom recommendations on Spotify with access to top-notch podcasts as well. No wonder it has such a massive user base.
But how does Spotify make money? How much revenue does it make? Keep on reading to find out answers to such interesting questions!
|23 April 2006
|Daniel Ek (CEO, co-founder), Martin Lorentzon (co-founder)
|Public (NYSE: SPOT)
The duo wanted to create a legal music platform in response to the rising music piracy in the 2000s, and thus the idea of Spotify came into their minds.
Eventually, they convinced record labels to share content in return for a 20% stake in the company, and thus, Spotify was launched in 2008.
After its launch, Spotify became an instant success, and its partnership with Facebook further helped the company to achieve prominence.
Today, Spotify dominates the way we consume music and has millions of users globally.
Having said that, Spotify still faces tough competition from Apple Music, Pandora, Deezer, etc.
As a survival strategy, Spotify has branched itself into podcasts by acquiring leading podcasters such as The Ringer, The Joe Rogan Experience, etc.
Since everything looks so good, you might be curious to find out if Spotify is profitable. Keep on reading to find out!
Spotify’s Biggest Market
India and Indonesia are the two biggest markets for Spotify.
Thanks to its diverse offerings, flexible plans, and customized offerings, Spotify has been able to establish itself as a leader in music streaming services in India, especially.
To appeal to the Indian audience, Spotify made a solid entry in India in 2019 by offering over 40 million songs in diverse languages, including Punjabi, Malayalam, Telugu, Tamil, Hindi, etc.
Spotify introduced affordable subscription plans starting from Rs. 7 a day and going up to Rs. 999 per year that allowed ad-free music streaming, offline streaming, and unlimited downloads. And also offered a freemium plan that did not require any fees but was supported by ads.
They launched a student plan to attract the younger population in India that offered a 50% discount.
Additionally, they also introduced a variety of payment methods, such as Paytm, GooglePay, etc., to appeal to a wider audience.
The Indian Market For Spotify
India has become a significant market for Spotify for a number of reasons:
First, India offers a diverse pool of content, both in terms of music and podcast, which caters to users with different tastes, preferences, and languages. Spotify also partnered with local artists to offer a wide range of content on its music platform.
Second, for Spotify, India is a testbed for experiments and innovations that helps the platform to improve its features.
The Indian market is also the largest market of users listening to personalized playlists based on previous likes, dislikes, etc.
This allows Spotify to test and work on its new features before launching it in other countries.
Third, Indians spent the most time listening to music than other regions. They also create the most number of playlists and are the biggest market for podcasts, even helping Spotify grow.
Even though Spotify’s biggest market is India, for India, the biggest music platform is not Spotify.
Gaana, a music streaming platform, is dominant in India with a 30% market share, followed by JioSaavn with 24%, Wynk Music at 15%, and lastly, Spotify and Google Music at a 15% market share each.
Is Spotify Profitable?
No, Spotify is not profitable and has, in fact, never made a profit ever since it went public. The company generated a net loss of €430 million in 2022 compared to a net loss of €34 million in 2021 and €581 million in 2020.
Even though the company has never been profitable, it has seen positive revenue growth. In 2022, Spotify made €11.7 billion in revenue, an increase of 21% compared to the previous year.
Spotify Profit/Loss (2009-2022)
As you can see, Spotify has never reported profits ever since it went public. Part of this is due to the royalty fee split with publishers, of which only takes 30 percent of profits.
Spotify Annual Revenue (2016-2022)
Spotify’s revenue has been increasing over the years and in 2022 it increased by 21%.
Why is Spotify Not Profitable?
Despite stellar growth in revenue, Spotify is yet to become profitable, and these are some of the reasons why Spotify is not profitable yet:
Although India is the biggest market for Spotify, it is yet to dominate the market and has the lowest market share of 15% in India when compared to other competitors like Gaana, JioSaavn, etc.
Similarly, in the United States and in other countries, Apple Music and Youtube, among others, give solid competition to Spotify, which does not leave enough room for the company to attract new customers and make profits.
High Content Acquisition Cost
Like any platform, content is key for Spotify, and in order to acquire more content, they rely on third parties and record labels, for which the company spends major acquisition costs.
This is also one of the biggest reasons why Spotify is not profitable yet and will most likely keep the profits thin even in the future.
How Does Spotify Make Money? : Business Model
Spotify primarily makes money in two ways:
Spotify offers access to music on its platform in two ways: one is free, and one is paid membership.
Users who do not want to pay for a subscription to Spotify can do so by accessing Spotify’s ad-supported services.
Such users have limited access to the company’s on-demand music catalog and are interrupted by ads every thirty minutes or so.
So Spotify’s revenue from its ad-supported services is generated by running ads across podcasts and music.
In the financial year 2021, Spotify’s ad-supported services segment generated €1.47 billion in revenue, contributing 12.6% of Spotify’s total revenue in that year.
Users who do not want to be interrupted by ads can buy Spotify’s subscription starting at $9.99 a month.
Subscriptions also allow users to stream music in high quality, allowing them to download and stream music offline as well. Spotify’s subscription is a win-win situation for both parties and allows the company to make money.
In the financial year 2022, Spotify’s premium services segment generated €10.25 billion in revenue, contributing 87.4% of Spotify’s total revenue in that year.
Spotify Annual Users (2015-2023)
Spotify’s annual user count is consistently increasing, and by the end of 2023, it is expected to see 517.69 million users.
Spotify Annual Subscribers (2015-2022)
In line with revenue and users, Spotify’s annual subscribers are also increasing consistently.
How Much is Spotify Worth?
According to Companies Market Cap, as of 2023, Spotify’s net worth or market cap is $33.36 billion making it the world’s 553rd most valuable company by market cap.
Compared to the previous year, Spotify’s net worth increased by 74.05%, which shows a massive increase and growth of the company.
Spotify Vs Apple Music & Other Competitors: users
As you can see from the graph below, Spotify has the most number of users.
In spite of numerous competitors, Spotify is one of the most popular music streaming platforms and a leading company.
Although the company is yet to make a profit and has a long way to go, its consistent positive revenue and constant innovation paints a positive picture for the company.
You now know the answer to “Is Spotify profitable?” but you will have to wait to see if the company can become profitable in the near future.
Who owns Spotify?
Spotify is owned by its founders, Martin Lorentzon and Daniel Ek. As of 2023, Martin Lorentzon has 42.6% of the voting power and holds 10.9% of ordinary shares.
Daniel Ek, on the other hand, has 31.7% of the voting power and 16.5% ownership of ordinary shares.
How much is Spotify's debt?
Total debt is the sum of all non-current and current debt, and as of 2023, Spotify’s total debt in its balance sheet was $1.85 Billion.
What is the future outlook for Spotify?
Spotify is expected to reach $291.6 million by the end of the year 2023 and is expected to grow at an annual rate of 8.19% from 2023 to 2027.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.