Onur Dogman | Light rocket | Getty Images
In this weekly CNBC series, the companies that made the first Disruptor 50 list 10 years later are featured.
Spotify, once a Swedish startup tasked with tackling music piracy, is now the world’s most popular audio streaming subscription service.
The platform, first launched in 2008, started out as a way to let listeners stream their favorite songs while still compensating artists for their work – a major problem caused at the time by file-sharing services like Napster and LimeWire, which severely impacted music sales. . as the services had no legal rights to the music.
Today, Spotify has over 80 million tracks available for users to stream. In its latest earnings report, the company advertised 456 million active users and 195 million paying subscribers across 183 markets. The platform revolutionized audio streaming—it was listed on the CNBC Disruptor 50 in 2013, and appeared on the list in 2014, 2015, 2016, and 2017—and laid the foundation for future audio streaming services.
Spotify’s success quickly attracted the attention of major technology competitors, who have since launched their own streaming music platforms such as Apple Music, YouTube Music, and Amazon Music. But even in the face of competition and uneven stock market dynamics, Spotify remains at the top of the charts as the No. 1 audio streaming service and keeps up with subscription prices.
Its $9.99 monthly premium plan hasn’t changed since it launched in the US in 2011, and it’s still as low as any competitor. Apple recently raised the monthly price by $1 to $10.99. (Amazon Prime members get unlimited music for $1 less than its non-Prime price of $8.99.) Price changes continue between players in the music streaming space. The YouTube Music Family Plan costs $14.99 per month; Amazon this week raised its family plan from $14.99 to $15.99, as did Spotify.
Daniel Ek, co-founder and CEO of Spotify hinted at higher prices in the U.S. next year on a conference call after Spotify’s latest quarterly report saying raising subscription prices “is one of the things we’d like to do and that’s what we [consider] with our label partners.”
“In fact, we’ve had over 46 price increases in markets around the world,” Ek told CNBC in October. “And many of these markets have had a lot more inflation and a lot more economic trouble than the US currently has, and despite all of that, our submarine numbers are holding up a lot better than expected. We think we have price power.”
Competition advances by subscribers, with Diversity Report This Week that YouTube Music grew from 50 million subscribers to 80 million in a year. Apple reported an early surge in music-related paying subscribers back in 2019 to 60 million, but has since focused on numbers for its overall services business, which includes Apple TV+, Apple Music, cloud services and others that rose to 860. million paid subscriptions.
In 2015, Spotify started moving beyond music to become the next big name in the audio space by launching its podcast platform in the United States. The platform now offers over 4.7 million podcasts and has implemented additional video elements to boost user engagement.
“We’re constantly trying to move forward with better products, better programming, better curated work,” Ek told CNBC in 2015. work in it.”
Most recently in September, the company announced it had acquired over 300,000 audiobooks available for purchase on its platform in a bid to directly compete with audiobook services like Amazon’s Audible.
“We see an opportunity to keep imagining and exploring new verticals on our platform – in audio but beyond.” Ek said at the company’s Investor Day in June. “And for each vertical, we will develop a unique set of software, services, products and business models that will be tailored to that particular ecosystem.”
Spotify went public in April 2018 in an unusual direct listing, becoming one of the biggest tech companies to do so at the time. The listing was unique as the company already had significant exposure and did not need to raise capital. The IPO launch was considered a success as the stock traded above its reference price on the opening day and was in a fairly tight range.
“We set out to reimagine the music industry and provide both artists and consumers with a better way to benefit from the digital transformation of the music industry,” the company said in an initial filing in February 2018. “Spotify was founded on the belief that music is universal and that streaming is a more secure and seamless access model that benefits artists and music lovers alike.”
Musicians didn’t always share this view, and many opposed paying royalties in the early years of Spotify’s rise. Taylor Swift removed her catalog from Spotify in 2014 and went so far as to to write an article for the Wall Street Journal on the devaluation of music caused by technology. Thom Yorke of Radiohead has been a constant critic of streaming, once calling Spotify “a dying corpse’s last desperate fart”.
As the music industry shifted to predominantly streaming, the number of complaints decreased, but not the criticisms of Spotify. Its shares fell $2 billion in January when the platform came under scrutiny for one of its most popular podcasts, The Joe Rogan Experience, spreading misinformation about Covid-19. Artists such as Joni Mitchell and Neil Young, who have long been critics of streaming platforms, have removed their music from Spotify in protest. The company removed several episodes of Rogan’s podcast containing offensive material, but Ek refused to reveal the identity.
Profitability is still a major business concern. Spotify posted bigger-than-expected losses in the third quarter, and shares hit new lows.
Throughout this time, Spotify has remained #1 by a significant margin over the competition. What keeps Spotify users on the platform? The company trusts its personalization algorithms, which make the service unique for each consumer.
Its Daily Mix and Discover Weekly playlists are tailored to each individual user with the music they love as well as new tracks the platform thinks they might like based on their listening history. At the end of each year, the company also releases Spotify Wrapped for every user, creating playlists to highlight their top artists, songs, albums and genres of the year and encouraging them to share their results on social media.
Ek said the company will generate $100 billion in annual revenue over the next decade — current annual revenue is roughly $12 billion. He wants to reach 40% of gross margin – the last quarterly gross margin was 24.7%.
Ultimately, Ek is aiming for a billion users on a “much more dynamic and open platform.”
“A platform that will entertain, inspire and educate over a billion users around the world,” Ek said at the company’s Investor Day. “And as a global platform for creators, we will provide the infrastructure and resources to enable 50 million artists and authors to grow and manage their own businesses, monetize their work, and market it effectively.”
Sign up for our weekly original newsletter that goes beyond the annual Disruptor 50 list and offers more insight into the listing companies and their groundbreaking founders.