World’s Biggest Music Streaming Platform: Spotify and Its Success Story

Are you a music artist on Spotify? Let’s find out more about its success story along with its business model and how it all started in the first place.

Music is a medium that connects with everyone and it is hard to find anyone who does not like music. While every music lover has a different taste in music, it is not always possible to offer a listener exactly what they are looking for. However, Spotify has made it possible which is a driving factor behind the company’s success. Spotify is currently the biggest and most influential music platform around the globe which can be enjoyed both online and offline.

The company was founded back in April 2006 and the headquarters and situated in Stockholm, Sweden. With its global popularity, the platform has become one of the biggest international audio streaming platforms in many countries including India and America. The company has made some significant progress within less than two decades after its establishment. Let’s find out more about the music company’s business model and creative stories that helped to reach new heights of success.

About The Company: Spotify

Since its inception in 2006, Spotify has kept offering new audio content to users whether songs, audio stories, or podcasts. The company was established by Martin Lorentzon and Daniel Ek and it goes without saying that the founding members have done a great job in turning this Swedish audio-music streaming platform into a global one. This platform offers a whooping number of 70 million songs that belong to a diversified collection of music genres. The content is produced by a variety of media companies and record labels. Therefore, the platform only offers copyright-protected digital music content without any piracy. While it caters to the listeners’ needs; it also empowers artists by providing royalty and exposure.

With freemium features and affordable premium subscriptions; Spotify encouraged listeners to enjoy a wide array of audio content with a seamless experience. The company was established in 2006 but it took two more years to launch successfully and finally became handy in 2008. One of the greatest reasons behind Spotify’s success is its user interface ad algorithm system that allows users to get access to a wide variety of playlists and individual music. The curation is super dynamic, smooth, and easy to find. Users can just put anything on the search bar whether it is the name of the song, the artist, or the featuring artist; the right song will appear on the top of results.

Currently, there are more than 239 million Premium subscribers on Spotify as of the first quarter of 2024. With its introduction of online and offline modes with ad-free and premium features; a lot of users have switched to membership. The company has received 81 million new paid subscribers on the platform in just the last three years. Not just the listeners, but ‘Spotify for Artists’ is also of the greatest benefactor for the business that allows emerging artists to pave a successful career ahead. Starting from promoting their shows to selling their merchandise; the platform allows everything to provide a cohesive business platform based on music.

Position in Industry

The global market size for music streaming was estimated at USD 41.52 billion in 2023 which is showing a projection of hitting USD 104.09 billion by 2032 with a growth rate of CAGR of around10.75%, from 2024 to 2032. With this rapid and humongous growth of the industry, Spotify has found more beneficial opportunities in the potential market. Currently, the company is dominating with a 31.7% market share of the global music streaming industry. With the increasing adoption of modern technologies and catering to the personal needs of the users Spotify is constantly improving its market presence both technically and financially.

The History of Startup

In order to deal with the increasing problems of music piracy, Daniel and Martin came up with the idea of creating a music platform that can reduce piracy while offering the benefits of both, online and offline music listening. The issue of piracy was not letting artist generate enough earnings for their musical contributions. However, Spotify changed the landscape for artists. What was initiated as a startup in 2006 is now, one of the biggest and most successful music streaming platforms around the world.

There are no inspiring stories behind the name ‘Spotify’ as it simply came into Daniel’s mind when he misheard someone. However, later on, the founders explained that ‘Spotify’ is actually a relevant name as it is defined as ‘Spot’ + ‘Identify’. The platform first launched in 2008 in Scandinavia, France, Spain as well as the United Kingdom. That was the just beginning and now the platform has spread its network in over 180 countries; turning itself into a global platform.

The Founding Members

As mentioned before, the founding members of Spotify are Daniel Ek and Martin Lorentzon. Let’s find out more about these masterminds.

· Daniel Ek – Daniel is currently the Chairman and CEO of Spotify and a guru of entrepreneurship. He started his ventures when he was only 13 years old and started his professional journey by designing websites for various clients. He gained a fair amount of experience while working in a leading role at the browser-based game and fashion community, Tradera. Later on, he started working in an advertising company named Advertigo. He has also worked as the CEO of μTorrent before creating his empire with Spotify.

·  Martin Lorentzon – Martin is a co-founder of Spotify who started his initial career with an internship at a Swedish Multinational Telephone Company, named Telia. Later on, he moved to San Francisco and joined the company AltaVista. In 1999, he co-founded Netstrategy which became a leading platform in the European Marketplace. By 2006 Daniel and Martin became good friends and decided to launch their own company with an innovative initiative, which gave birth to Spotify. The company currently employs somewhere around 5,000 - 10,000 employees.

Mission and Vision

Spotify has a sole mission "to unlock the potential of human creativity” To offer that opportunity, the platform is helping spread musical talents all around the world. It has a vision to empower everyone “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." It wants to create an extended cultural platform where creative artists can experiment beyond their conservative norms and enjoy an artistic and immersive experience.

Business Revenue Model

Spotify is based on a freemium business model where certain services are available for absolutely free of cost however, other premium services are paid which is comprised of more beneficial features. With the help of paid subscribers with premium accounts, Spotify generates its revenue. It also sells ads on the non-premium streaming service which is available for all kinds of users. With its generated revenue, the platform also pays royalties to artists based on stream count. They can earn up to $0.006 to $0.0084 per stream on the platform.

Funding, Investors, and Shareholders

Spotify has successfully raised more than $2.1 billion to this date and witnessed funds in 19 rounds from different companies and leading investors in the market. Let’s take a better look at the list of funds and investors,

·      Feb 10, 2023 - ValueAct Capital

·      January 8, 2018 - SharesPost Investment Management, EquityZen

·      December 15, 2017 - Tencent Holdings, SchindlerAM Ventures, Tencent Music

·      July 28, 2016 Secondary Market - Manhattan Venture Partners, blisce, Harmony Partners, GP Bullhound

·      March 30, 2016 - Dragoneer Investment Group, TPG, Vulcan Capital

·      January 21, 2016 - blisce

·      August 30, 2015 - EquityZen, SharesPost Investment Management

·      June 10, 2015 - Goldman Sachs Investment Partners

·      April, 2015 - Goldman Sachs Investment Partners

·      November 25, 2014 - blisce, Groupe Arnault

·      November, 2012 - $100 Million

·      June, 2011 - $100 Million

·      February, 2010 - Founders Fund

When it comes to shareholders, Daniel Ek owns 7.3% of the total shares while Martin possesses 10.9%. Both of them together have the highest amount of shares, being the founder and co-founder company. On the other hand, Investment corporation Baillie Gifford & Co. holds a total of 14.5% stake in the business. There are also individuals, such as T. Rowe Price and Morgan Stanley who own significant portions of shares, 6.18% and 3.66% interest respectively. Tencent is also an official stakeholder that owns 8.61% of the company's shares. Similarly, there is also Sony Group Corporation which owns 2.65% of the Spotify shares.

List of Spotify Acquisition

·      In 2013, Spotify acquired Tunigo, a Swedish music discovery app.

·      In 2014, it owned the Tech Company The Echo Nest.

·      In 2015, Spotify acquired a data science consulting firm known as Seed Scientific.

·      In 2016, They acquired two different companies in a single day, namely Cord Project and Soundwave.

·      Later on, in 2016, they also acquired a photo startup known as Crowd Album.

·      In 2017, Spotify acquired Sonalytic, MightyTV as well as blockchain startup Mediachain Labs. In the same year, they also owned Paris-based AI startup, Niland and a Stockholm-based online music studio, titled Soundtrap.

·      In 2018, the company acquired a San Francisco-based licensing startup named Loudr.

·      In 2019, Spotify acquired Gimlet Media, Anchor, and podcasting studio Parcast.

·      In 2020, Spotify owned The Ringer and Megaphone which improved its business aspects even further.

Spotify’s Investment and Partnership Plans

Till now, Spotify has invested in three major companies, namely,

·      DistroKid

·      Tencent Music Entertainment

·      Soundtrack Your Brand

When it comes to partnership, the platform is partnered with around 47 companies which includes 20 channel partners and 27 technology partners. Some of the biggest partnering names are Open AI, Calm, etc to name.

Growth of Spotify

·      According to the report of Q1 2024, Spotify currently has 615 million monthly active users. The platform has witnessed an astonishing hike as only in the last two years; the company gained more than 193 million monthly active users.

·      2019 offered 29.0% year-on-year growth with a significant rise in paid subscribers

·      Last year, the company generated around €13.24 billion in revenue which is a 12.9% enhancement year-on-year

·      Spotify is dominating a market share of 32% on the global music streaming platform and it has been holding the place since 2021.

·      The application is available in over 184 markets and over 180+ countries in the market.

·      While there are more than 7 million artists on Spotify; around 13,000 of them have witnessed a significant amount of revenue generation.

Financial Position

Spotify has been projecting significant growth every year. The revenue was Rs 0.34 crore in FY21 which rose up to Rs 16.12 crore in FY22. The increase was highly visible with Rs 44.25 crore in FY21 turning into Rs 156.46 crore in FY22. The huge financial growth is also offering more room for experimentation.

Spotify Products and Services

·      Free Spotify Service – Spotify offers a freemium service where some features are available for the free users but most beneficial features can availed by paying a nominal fee for it.

·      Daylist Feature – It is an algorithmic service that helps users customize their listening experience based on their moods and different emotions.

·      Audiobooks - Spotify Technology SA offers 15 hours of audiobook listening for free in most countries. The features of audiobooks started back in 2022.

·      Podcast – With the features of Podcast, Podcast hosting has become one of the most trendy and powerful ways to connect with the listeners. With the increasing popularity of podcasts, the platform offers a fruitful opportunity to grow as a podcaster.

Future Plans

When it comes to Spotify’s future plans, CEO Daniel Ek said, "Our goal is becoming the world's No. 1 audio platform." It is safe to say, that the company will be achieving its goal soon with a massive increase in its popularity and modern technology. The increasing influence of AI-related applications is allowing a more successful route for both the music artists as well as the listeners. Spotify has been dominating the music industry for quite a while now, and it is going to lead the way in the coming years as well.

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Find out how Spotify become one of the most successful and biggest music platforms around the world with its exceptional features. Founded in 2006, the company has made some significant progress through all these years. Let’s check the success story.