Spotify Users

2022 (as of September)195M273M
FourWeekMBA BI Intelligence – Source data: Financial Statements

Spotify’s business model is one of the most exciting businesses created in the digital era.

With a business model that mixed subscription and ad-supported revenues, Spotify is among the few who managed to make this model work for media.

In fact, most attention-based businesses went for an ad-supported-only business model in the digital era.

Take the example of attention merchants like Google and Facebook.

In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Those companies converged primarily on an ad-supported business model.

In the opposite spectrum, companies like Netflix primarily relied on subscriptions to power up their business model.

Only recently, ad-supported and subscription-based business models are converging toward a hybrid model similar to Spotify.

Where you have a part of the business that premium members support and a part of the business that instead is supported by advertising.

Well, Spotify has both ad-supported and premium revenue engines built into its business model.

For instance, a company relying on ads, like Twitter, is now experimenting with subscriptions.

And a company like Netflix, which has been relying on subscriptions, is now turning on ads.

Thus, Spotify is really the business model that many are trying to emulate today, and one of the few which understood how to make it work at scale!

Related Visual Stories

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. By 2022, Spotify had 195 million premium members and 273 million ad-supported users.

Spotify Ad-Supported Business

Spotify Audience Network is the underlying advertising infrastructure that supports its ad-supported user base. The Spotify Audience Network was born as the result of the acquisitions of Anchor and Megaphone. By 2022, Spotify had 273 million ad-supported users.
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.

Spotify Competitors

Spotify is the world’s largest music streaming platform with over 381 million users across 184 markets around the world. The company was founded by Martin Lorentzon and Daniel Ek in 2008 in response to the shutdown of peer-to-peer music service Napster. Spotify became a success because it was the first company to determine how to distribute music legally and compensate the music industry at the same time. The platform now offers various curated music discovery services, music stations, audio customization, and private listening. In recent times, it has also ventured into the streaming of audiobooks, podcasts, comedy, poetry, and short stories.

Spotify Model

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.

Read Next: Spotify Business Model, Spotify Advertising Business, Spotify Model.

Scroll to Top