How Spotify makes money? | About Spotify Business Model

Spotify: What You Need to Know About Spotify Business Model

Well well, who hasn't heard of Spotify! Spotify is the globally leading audio streaming service. It offers free as well as premium paid audio streaming services. How has Spotify managed to stay relevant even today against the likes of 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 of the other music streaming services, Spotify actually feels the need 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 it tries in 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 includes all small artists as well which is a bonus for the users to find underrated tracks.

Spotify's Revenue Streams

Spotify business model is a combination of subscription and advertising revenues. In other words, it operates both premium and freemium models. Spotify's aim is to make the music on the service accessible to as many people as possible. In order to achieve this, Spotify offers free access to some of the biggest music albums available. Check out: Screen Protectors Explained!

This enables Spotify to attract the largest number of users through their freemium model. Then, for ad free experience and downloads, users have to 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 Business Model works on the gross revenue models.

Spotify's Costs and Expenses

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. But the company has reduced its operating loss in the past few quarters. Spotify is expected to continue growing its revenues in the coming quarters. 

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 of 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 Business Model

Spotify is also 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 is going to be added as a feature for free for all existing premium users. With this, Spotify is competing against the likes of Apple Music.

Spotify Exclusive Podcasts

Spotify announced the exclusive launch of its podcast player for all its Premium users a few years ago. It brings the Spotify original content, including its own curated playlists, as well as additional content from a variety of popular podcasters. Exclusive Podcasts form a bigger part of Spotify Business Model.

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 personalised radio experience and supports both offline and the desktop versions of Spotify. It allows users to listen to their favourite podcasts, and can be accessed through Spotify's mobile apps as well as from the company's website.

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

Try out Spotify Premium for Free!

How it Deals With Piracy and Competes With Apple Music

Spotify is different from the 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 around the world. Spotify charges subscriptions to its users. Dealing with privacy is one of the main points the company includes in the Spotify Business Model.

Conclusion

What is an appropriate streaming service? 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.

Spotify is one of the best and this is how Spotify actually makes money in 2021. I hope you are aware of the Spotify Business Model with this article. The smooth app and wide selection catalogue can be found nowhere else. With Spotify Hi-Fi lossless audio, it is going to be even better.