How Spotify makes Money?

How Spotify Makes Money: Insider Insights 2024

Spotify is the leading global audio streaming service. So, how Spotify makes Money? It offers free and premium paid audio streaming services. Due to it, Spotify has remained relevant even today against Apple Music, Amazon Music, and other competitors? Let us discuss Spotify’s Business Model and how it makes money.

Spotify Business Model

Spotify business model is the company’s vision of value creation. Unlike most other music streaming services, Spotify needs to create value through its audio content to bring about its unique music experience. Spotify’s goal is to make users happy and passionate about music so that they spend more time listening to and discovering new music. This is the ultimate goal of the Spotify Business Model. This is evident through their tagline – Music for everyone!

Spotify is essentially not an online radio service or a playlist service. Instead, the company provides an integrated streaming platform that allows users to discover and listen to songs, playlists, and audio content. To attract users, Spotify has developed a compelling music listening experience. It also includes all small artists, which is a bonus for users to find underrated tracks.

How Spotify makes money | Spotify business model
How Spotify makes Money?

Spotify business model is a combination of subscription and advertising revenues. In other words, it operates both premium and freemium models. Spotify aims to make the music on the service accessible to as many people as possible. To achieve this, Spotify offers free access to some of the biggest music albums.

This enables Spotify to attract the most users through its freemium model. Then, for ad-free experience and downloads, users must subscribe to the service. This forms the major 2 pillars of revenue for the company. The company also earns money from music rights licensing. All of this together fits into the whole picture. Spotify’s Business Model works on the gross revenue models. This is how Spotify makes Money!

How Spotify Makes Money with its Business Financials

If we look into the financials, In the first quarter of 2018, Spotify reported total revenue of €1,297 million ($1,601 million). While the gross profit is higher than the total revenue, the company still had an operating loss of €236 million. However, the company has reduced its operating loss in the past few quarters. Spotify is expected to continue growing its revenues in the coming quarters.

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We can get a good idea of how Spotify’s revenue will grow from some graphs. The revenue growth was highest in the first quarter of 2018. A big part of this growth is due to the fact that there are more features. Spotify’s Cost of Revenue In the first quarter of 2018, Spotify’s revenue is almost half of its cost of revenue.

Future of Spotify

Spotify is working on launching Spotify Premium and Spotify Hi-Fi audio. Below is our video which covers the features of Spotify Hi-Fi Lossless Audio in 2021. With Spotify Hi-Fi, it aims to deliver all music in CD Quality and lossless audio. It will be added as a free feature for all existing premium users. With this, Spotify is competing against Apple Music. With Spotify’s Hi-Fi lossless audio, it will be even better.

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Another addition to its service line is the exclusive launch of its podcast player for all its Premium users. It brings Spotify’s original content, including its curated playlists, and additional content from various popular podcasters. Exclusive Podcasts form a bigger part of how Spotify makes Money. For example, some big podcasters are paid via a deal to make their podcast Spotify exclusive!

As an exclusive feature of the Spotify premium service, the new podcast player is available to all those who are Premium subscribers. The podcast player also works seamlessly with Spotify’s personalized radio experience and supports both offline and desktop versions of Spotify. It allows users to listen to their favorite podcasts and can be accessed through Spotify’s mobile apps as well as from the company’s website.

By getting exclusive rights to popular podcasts like Joe Rogan, Spotify stays relevant and provides the shows exclusively to which everyone loves to listen. On the other hand, it also shows ads for free users, making them transition to Spotify Premium.

Wrap Up

You might be wondering, in this free internet world abundant with piracy, how does Spotify maintain a stronghold? Well, Spotify differs from other music streaming services in that it doesn’t allow illegal music downloads or streams. The company tries to engage with its users to help them comply with local laws worldwide. Spotify charges subscriptions to its users. Dealing with privacy is one of the company’s main points in the Spotify Business Model. Thus, this is how Spotify Makes Money in 2025!

What is an appropriate streaming service for you? You should be confident when choosing a music streaming service. As it is said, choose the best tool for the task. In India, some of the record labels are not available because of disputes.

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