Spotify Beats All Expectations For Q3 2022

Spotify beats all expectations for this quarter, with 456 million monthly active users, distributed among 195 million premium subscribers and 273 million ad-supported users.

Spotify has generated over €2.6 billion in revenues from premium members this quarter alone, up to €2.17 billion in revenues in the same period last year.

And €385 million in ad-supported revenues, compared to €323 million in revenues in the same period last year.

In an uncertain macroeconomic scenario, Spotify keeps growing its topline, yet, in this environment, Daniel Ek, founder, and CEO of the company, highlighted how Spotify would make future investment decisions:

We will make new investments with two key criteria in mind: First, it must be accretive to margin (over the investment period) given this new hurdle rate…. and second, over the long term, that investment must strengthen our value proposition to users and creators alike.

Spotify’s quarter’s revenue growth was driven by a premium subscriber growth of 13%. Its subscriber base kept growing, given Spotify’s massive investments in growth initiatives.

Spotify went all in on podcasting. Indeed podcasting drove the ad-supported revenues together with the music business.

In fact, Spotify has completed the acquisition of various startups in the podcasting space, such as: Podsights, Findaway, Sonantic, Chartable, Whooshkaa and Heardle.

The most interesting part is the Original and Exclusive podcast’s growth and the further adoption of the Spotify Audience Network from advertisers!

Where most companies cut their workforce, Spotify keeps investing in it. This results in reduced margins yet incredible growth, even in this economic environment.

Spotify keeps pushing its multi-modal (expanding the formats), multi-vertical strategy.

In short, the company keeps expanding the formats available on the platform (from music to podcasting, audiobooks, and more).

While it keeps strengthening its advertising network (Spotify Audience Network).

And it keeps executing a multi-vertical strategy, where Spotify covers more and more topic areas of interest for its subscribers!

Read Also: How Does Spotify Make Money, Spotify Model, Who Owns Spotify, How Does Twitch Make Money, How Does SoundCloud Make Money.

Spotify Business Model

Spotify is a two-sided marketplace where artists and music fans engage. Spotify has a free ad-supported service and a paid membership. Founded in 2008 with the belief that music should be universally accessible, it generated €9.66 billion in 2021. Of these revenues, 87.5% or €8.46 billion came from premium memberships, while over 12.5% or €1.2 billion came from ad-supported members.

Economics of the Spotify Business Model

Spotify licensing deals affect its business model. The company runs on both a free service, which is ad-supported and a subscription premium service. They have different economics. The ad-supported business had a 10% gross margin in 2021, compared to 29% of the subscription-based business. That’s because the more the content gets streamed on the platform, the more that increases royalty costs for Spotify. That is also why the company invested in developing its content. Thus, in part transitioning from platform to brand.
The Spotify Model is an autonomous approach to scaling agile, focusing on culture communication, accountability, and quality. The Spotify model was first recognized in 2012 after Henrik Kniberg, and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility. Therefore, the Spotify model represents an evolution of agile.

Who Owns Spotify

The multi-billion music streaming company Spotify is primarily owned by its founders, Daniel Ek and Martin Lorentzon. As of 2021, Daniel Ek has 16.7% ownership of ordinary shares and 31.9% of the voting power. Where Martin Lorentzon has 10.9% of ordinary shares and 42.9% of the voting power. Another key shareholder is Baillie Gifford & Co, a Scottish-based money management firm, followed by Morgan Stanley, T. Rowe Price, and Tencent.

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