On it «Investor Day 2022» celebrated this week, the #1 music app presented its various executives, announced its on track to double its reach to +1 billion users and 50 million creators by 2030, and confirmed that over the next decade it has the potential to generate USD 100 billion in annual revenue.
Daniel Ek, CEO and founder of Spotify, highlighted the evolution of the business model and strategy since its last “in person” Investor Day in 2018, with the ambition to establish the platform as ‘the home of the best artists, creators and educators in the world’.
He underscored that Spotify is on track to double its reach to +1 billion users and 50 million creators by 2030, while he reinforced that over the next decade the company has the potential to generate USD 100 billion in annual revenue, achieving a gross margin of 40% and an operating margin of 20%.
Ubiquity, along with customization and freemium, remain the key differentiators of the platform: ‘The first concept is a major driver of new users (2,000 partners as of 2022, with 28% of new signups coming from them, up 14% from 2018). 89% of our Premium subscribers use Spotify across multiple devices or platforms, up 75% since 2018’, he explained.
And completed: ‘People using Spotify on more than one device represent our most engaged users, with lower churn and higher lifetime value. In fact, our churn rate has decreased 30% in the last 4 years (from 5.5% in 2017 to 3.9% at the end of 2021), and breaking it down further, in our developed markets, we’ve seen strong drop-rate reductions, which dropped to 2.4%, and third-party measurement company Antenna ranked Spotify as the music streaming service with the lowest drop-out’.
Ek described that he is building the “Spotify Machine», a unique business model that allows to bundle verticals and revenue streams into a single consumer experience, benefiting users, creators, ad partners and developers, and Spotify as a whole. Each vertical –music, podcast, and now audiobooks (more on that later)– enriches the consumer and creator proposition and allows us to grow our margin over time with our market products.
Regarding podcasts, Dawn Ostroff, CCO of Content and Advertising, highlighted that Spotify is the #1 platform most used by podcast listeners in many markets around the world, including USA. She teased some upcoming titles, including a podcast with Kim Kardashian, the continuation of our partnership with DC Comics following the worldwide success of Batman Unearthed, and the Meghan Markle podcast. We will provide more information in the coming weeks.
Maya Prohovnik, director of Talk Verticals, further explained the revenue model and opportunities that Spotify sees in the podcast vertical. She highlighted that advertising monetization has enabled 90,000 podcasters to earn money on our platform in the last month alone. She pointed out the investment in non-ad monetization opportunities so creators can choose the business model that suits them best.
‘Since the launch of our podcast subscription model last year, it has already become a significant revenue model for creators who have enabled it and the user retention rate has been 90%. In 2021, podcast revenue represented €200 million, which is expected to increase substantially in 2022 and may grow to as much as USD 20 billion globally’, added Prohovnik.
The company believes that audiobooks represent a massive opportunity and a USD 70 billion annual potential. ‘That’s why we announced our intent to acquire Findaway by the end of 2021’, Nir Zicherman, Global Head of Audiobooks, underlined. He further explained that this model represents a 6-7% share of a larger industry, but is growing 20% year-on-year. ‘We will continue to invest in this space with the creation of a new vertical. At the moment, this audiobook vertical is not yet live in the region, but we will be sure to keep you informed when we have more information’, concluded Zicherman.
Also, there were news in Spotify music vertical. Charlie Hellman, VP and Head of Music Product, spoke about the company’s two main and complementary goals: first, to make a unique and superior music experience for fans; and, second, to create a more open and valuable ecosystem for artists.
‘Today, Spotify powers 22 billion artist discoveries monthly, up from 10 billion in 2018. Two billion of those artist discoveries turned into what we quantify as connections, or fandoms. Furthermore, a third of all new discovered artist covers occur in personalized and algorithmic playlists on the platform’, he remarked.
Spotify is expanding opportunities beyond the big stars. In the last 2 years, 150,000 artists have been added to a playlist for the first time. Since 2018, artists who use the suite of free “Spotify for Artists” products on a monthly basis have increased more than 6-fold, and today 83% of the streams come from artists who use our creator tools at least on a monthly basis.
‘As we connect more users with more artists around the world, we’re helping artists generate more revenue through a number of tools: our Fans’ First program, which uses our data to identify the most passionate fans of an artist with exclusive offers, such as early access to concert tickets or exclusive merch, has generated approximately USD 300 million in revenue for the music industry’, concluded Ek.
