Marketing Analysis

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A Market Analysis for
Spotify
Jennifer Jenkins
Full Sail University
Project & Portfolio II: Business and Marketing
October 15, 2023

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EXECUTIVE SUMMARY
The purpose of this market report is to provide a detailed assessment of Spotify’s current
and possible future strategies to sustain an advantage in the music streaming industry. Spotify is
currently the most-used music streaming platform, holding a 31% share globally. In this report,
findings show that Spotify’s top competitors are large tech giants, and they are not far from
catching up with Spotify’s current lead in the market.
OBJECTIVE
The purpose of this report is to explore ways Spotify can build new revenue streams and
increase the number of paid subscribers.
RESEARCH METHODOLOGY
The information in this report was found using external, internal, and secondary research
sources from the internet. The research was conducted in the month of October 2023. The
information is current and up to date.
RESEARCH AND KEY FINDINGS
Spotify is a digital music streaming media service that was launched in 2008. The two
founders, Daniel Ek and Martin Lorentzon, still own majority of the shares for the Spotify.
Spotify has two service lines: Spotify Premium and Spotify Advertising. Spotify Premium is a
paid monthly subscription to access an ad-free music and podcasts plus many other user benefits.

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Spotify Advertising offers brands and businesses to advertise on their platform and the option to
use their custom advertisement
creator (Spotify, n.d.).
Spotify at a financial position
is not doing well. They are currently
operating at a loss and have been
since 2021 (Gotting, 2023). At the
beginning of 2023, Spotify’s financials have started to show major improvement. Spotify’s peak
was in February of 2021 holding a market cap of $69.35 billion. By the end of 2022, Spotify’s
market cap dropped down to $13.72 billion. In 2023, Spotify’s was able to more than double
what was achieved in 2022, at $30.67 billion. This showed that Spotify is improving quickly and
steadily.
Spotify is currently leading in
the music streaming industry market,
being the most popular platform with
the highest revenue. Spotify’s top
competitors, Apple Music and
Amazon Music poses as a great threat
as they are under large tech giants.
Spotify is aiming to keep innovating
their platform to deliver the best
services to their users to continue to lead in the market. Spotify’s 2nd
quarter of 2023 delivered
strong numbers, beating what was forecasted (Spangler, 2023). Spotify gained over 10 million
new subscribers, which was 3 million over what was expected.
Spotify (2023)
Business of Apps (2023)

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Spotify has over 480 million active subscribers which attracts more advertisers to use
their advertising service. They offer a large variety of content for their users and have an easy to
navigate platform that helps retain their current users. Spotify also has the opportunity expand
into new markets and create more streams of revenue and explore new partnerships to expand
their content and technology.
Most of Spotify’s revenue goes to paying for the rights to have their content on their
platforms. It was reported that Spotify pays out almost 70% of every dollar earned to music-
rights holders (Aswad, 2023). This prevents Spotify from investing in other areas of the
company.
Spotify mainly focuses on growth and exposure. Using strategic partnerships to “drive
consumption and monetization at scale” (Spotify, 2023). Spotify has partnered with major
technology companies, record labels, podcast companies, and artist to improve their services.
Spotify is extremely dependent on economic
health. Having only two streams of revenue,
both being user and subscriber dependent
puts Spotify in a vulnerable position. If the
economy is suffering from inflation or high
unemployment rate, the company with
experience a negative impact on the subscription and user rate. Most find that Spotify is not a
necessity.
CONCLUSIONS
Spotify lacks when it comes to net profit margin, being -6% since December 31, 2022
(Yahoo!, 2023). With the negative impacts from high royalty payouts, low number of revenue
Spotify (2023)

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streams, and operating at a loss since 2021, Spotify is a high-risk investment. Spotify does show
major improvement in their recent quarters, reporting numbers much higher than expected.
Spotify shows evidence of consistent growth since 2021, growing the confidence from investors
(Dredge, 2023).
RECOMMENDATIONS
Spotify has great potential and is currently the best in their market. If Spotify can increase
their revenue and come out of operating in a loss, they could be an exceptional investment. The
CEO, Daniel Ek, has laid out plans to increase the number of users Spotify has. Ek states, “If we
have user growth, the revenue growth eventually comes – that’s the lesson been learned at
Spotify, and we have seen it over and over.” Spotify’s goal is to reach 1 billion users and $100
billion in annual revenue by 2030. The plan is to move the company’s focus on expanding its
podcast and audiobook offerings (MusConv, n.d.). In addition, Spotify is also expanding its
audiobook content. Spotify has partnered with many high-profile acquisitions to make it possible
on their platform. Spotify’s numbers have been reporting higher than what is forecasted so the
plan has had a positive effect on the company thus far.

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REFERENCES
Aswad, J. (2023, March 24). Spotify’s payments to the music industry nearing $40 billion.
Variety. https://variety.com/2023/music/news/spotify-payments-music-industry-40-billion-
1235547087/
Götting, M. C. (2023, March 21). Pandora’s revenue 2022. Statista.
https://www.statista.com/statistics/190895/pandora-revenue-since-
2007/#:~:text=Pandora’s%20revenue%20reached%202.09%20billion,Sirius%20XM%20in
%20February%202019.
Götting, M. C. (2023, September 25). Spotify: Quarterly Operating Income/LOSS Worldwide
2023. Statista. https://www.statista.com/statistics/1022122/spotify-operating-income-
quarterly/#:~:text=In%20the%20second%20quarter%20of,at%20the%20beginning%20of
%202023.
Music streaming app revenue and Usage Statistics (2023). Business of Apps. (2023, July 20).
https://www.businessofapps.com/data/music-streaming-market/
Spangler, T. (2023, July 25). Spotify packs on more premium subs in Q2 than expected to reach
220 million, projects slower growth after price hikes. Variety.
https://variety.com/2023/digital/news/spotify-q2-2023-earnings-premium-subscribers-
growth-slows-1235679219/
Spotify lays out plan to reach 1 billion users by 2030. Transfer your playlists between Spotify,
Apple Music and 125+ music services with MusConv! (2023, March 7).
https://musconv.com/spotify-lays-out-plan-to-reach-1-billion-users-by-2030/
Spotify Premium - Spotify (US). Spotify. (n.d.). https://www.spotify.com/us/premium/
Spotify reports first quarter 2023 earnings. Spotify. (2023, April 25).
https://newsroom.spotify.com/2023-04-25/spotify-reports-first-quarter-2023-earnings/
Turner, A. (2023, August 9). Spotify users: How many people have spotify?. BankMyCell.
https://www.bankmycell.com/blog/number-of-spotify-users/
Yahoo! (2023, October 23). Spotify Technology S.A. (spot) stock price, news, Quote & History.
Yahoo! Finance. https://finance.yahoo.com/quote/SPOT?p=SPOT&.tsrc=fin-srch

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APPENDICES
Appendix A
https://www.businesswire.com/news/home/20220427005371/en/Spotify-Technology-S.A.-Announces-Financial-Results-for-First-Quarter-2022