Spotify: The Global Leader in Streaming Music
Spotify was founded in 2006 by Daniel Ek and Martin Lorentzon in Stockholm, Sweden. The Spotify brand revolves around the phrase “the right music for every moment,” and its service meant to be easy, personal, and fun. Through Spotify, listeners can discover new music, personalize playlists, connect with friends, follow favorite artists, and more. The company offers custom radio stations and on-demand tracks as well as ad-free and offline listening for premium subscribers. It also features original tracks, dance series, and radio shows. Spotify can be accessed on various devices through the Spotify Connect network.
In terms of numbers, Spotify”s leadership position in the music-streaming industry is noteworthy:
- Estimated more than 150 million monthly active users (MAUs)
- Estimated more than 60 million paid subscribers
- More than 40 million tracks in its music library, with more than 20,000 tracks added daily
- 2 billion playlists, with more than 4 million playlists created daily
Spotify has key licensing partnerships with each of the “Big Three” record labels: Sony, Universal, and Warner Music. In 2015, Spotify branched out into video content, adding clips, news, and full episodes from partners like ESPN, MTV, Comedy Central, Adult Swim, VICE Media, the BBC, and Condé Nast.
Consumers can either opt for a $9.99 subscription service (available after a three-month $0.99 trial) or use the ad-supported free version. The free tier features both a mobile and a desktop version. On the desktop version, users can play any song from Spotify’s catalog but must view and listen to advertisements. On the mobile app, users can only play music in shuffle mode. The company uses the free, ad-supported service as a way to onboard paid subscribers.
Spotify faces a growing market opportunity and is arguably the single biggest driver of the recent growth in global music sales. The key issue for investors to monitor over the next 12–18 months is the effect of relationships and direct deals with music labels on Spotify’s gross margins.
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