Business News Digital Labels & Publishers Top Stories

Spotify tops 140 million users, as losses double in 2016

By | Published on Friday 16 June 2017

Spotify

While Spotify’s core business remains selling subscriptions, with the ad industry heading to the Med for its annual Cannes Lions junket next week, the streaming firm yesterday revealed its latest overall user figure, which – of course – includes all those freebie streamers that big brands might like to pay to reach.

Spotify now has over 140 million active users worldwide, up from the 100 million figure that was declared a year ago. As of March, 50 million were paying to use the service, and even though that figure will have risen since then, the streaming platform still commands an audience approaching 90 million that are in the reach of brands with ad spend. If only they’d fucking spend it. Go on brands, spend a little why don’t you? I mean, think of all the consumer data the streaming service is sitting on.

Or, in the words of Spotify’s Global Head Of Sales, Brian Benedik: “Spotify’s streaming intelligence provides psychographic and behavioural audience insights which go way beyond traditional demographics. Through billions of hours of on-demand, mobile-first listening on the Spotify platform, we’ve learned that music reflects people’s real-time moods and activities and captures unique understanding of moments in their lives”.

“We are just beginning to explore what these amazing insights can do for brands”, notes Benedik. “It’s an exciting time for our Spotify global advertising business. We launched our free, ad-supported tier on mobile three years ago, and the business is still growing fast with more than 50% year over year growth in 2016”.

Speaking directly to the advertising types heading to France, Spotify’s top sales man concluded: “This coming week, let’s celebrate what Cannes Lions has always been about … the creativity that fuels and powers this industry at its best. Then, let’s move forward with our audience in mind, thinking about how we can surprise, inspire, and engage them in exciting new ways”. Go on brands, surprise, inspire and engage, why don’t you?

While Spotify is trying hard to build a media business around its free level, the streaming firm’s core business remains premium subscriptions, meaning the ultimate end game is to convert as many of those freebie streamers into paying customers as possible.

Loss-making Spotify needs significant scale – in terms of paying users – to become a viable business long term. The latest stats brag came alongside chatter about a financial filing from the streaming business, which revealed that while its revenues grew by 50% in 2016 to 2.9 billion euros, net losses more than doubled to nearly 557 million euros.

The single biggest cost for Spotify, of course, is the royalties it pays to the record companies, music publishers and collecting societies. And while streaming deals are, at heart, revenue share arrangements, the minimum guarantees and advances the music industry demands continues to put pressure on Spotify.

The digital company has managed to negotiate slightly better terms with Universal Music and indie-label repping Merlin via its latest multi-year licensing deals, reducing revenue share commitments to the labels, in part to compensate for the big music publishers pushing their revenue share rates up.

Nevertheless, Spotify has committed to pay over at least 2 billion euros to rights owners over the next two years, the new financial filing confirmed. And to secure those more favourable deals, it had to make commitments on future performance and allow the labels to hold off brand new releases from freemium for two weeks.

Which possibly makes the freebie version of Spotify being pushed so heavily at Cannes Lions a slightly less attractive proposition. Depending on whether the labels can keep their windowed new releases off other free streaming services, in particular user-upload platforms like SoundCloud and YouTube.

Still, Spotify’s subscriber growth stats remain impressive, and ultimately the long-term success of the business depends on just how many paying subscribers it can ultimately get signed-up before it peaks, and whether that will be sufficient to make the numbers add up and take the company into profit.

And you never know, Benedik might score some serious brand money in Cannes to help make freemium slightly less of a loss-leader.

Elsewhere in Spotify news, tickets! Having done a deal with Ticketmaster last year on top of its long-running alliance with Songkick, Spotify is now integrating with AEG’s ticketing service AXS and self-service ticketing company Eventbrite.

Does that mean people listening to the CMU Podcast on Spotify will be able to buy tickets to CMU Insights training courses via Eventbrite right there in the app? I don’t know. But hey, look at my clever subtle plugs.



READ MORE ABOUT:

GET CMU NEWS BY EMAIL DAILY FIND OUT ABOUT UPCOMING CMU EVENTS