How Spotify Makes Money

Listen to podcast here

---

Do you remember the days when we used to buy CDs and DVDs that contained a specific catalogue of music of a particular artist or a particular genre, well who do not. It was a different kind of struggle to sort your favourite playlist whether it was your iPod, desktop or any other device, yes when smartphones were not in our hands. During those days, do you ever think that you will be able to manage your favourite playlist of your favourite artist or favourite genre just according to your listening pattern and even download it in high quality in just few

seconds. Well thanks to the technology for music-on-demand services.

This is 2020 and since last few years, we have been using numerous music streaming apps. In an era of the increasing popularity of these apps and services amongst millennials, Spotify stands out. Improved internet connectivity and large fan base of music artists are paving the way for the possibility of millions of users to access seamless music online. Spotify is a leading music streaming service that keeps spreading its feet across the world. It was founded in 2006 by Daniel Ek and Martin Lorentzon and launched in 2008. In April 2018 Spotify made its stock market debut in New York stock exchange. As of the company’s first-quarter of 2020, it has 286

million monthly active users and 130 million paying subscribers across the world, way more than its rival “Apple music”.

Now the question arises, How Spotify is earning? And how does it manage to hold its elite stature among all music streaming services?

There are three Prominent factors triggering the rise of Spotify.

1. Increasing charm for music streaming services amongst millennials. Users under 25 years of age are likely to consume more data than others. On an average, 107 minutes being spent on music streaming by a millennial daily according to Statista.

2. Second is, Uninterrupted services due to flawless internet network. Improved Internet connectivity makes it easy for users to access any digital service easily at any place and any time. More than 4 billion people across the world are active internet users.

3. Third is, Leniency for artists. Spotify offers leniency to artists to allow them to upload directly to its platform which is an essential factor to allow emerging artists to grow. Between Spotify and artists and music companies, proper license is getting signed. Spotify pays royalty to respective artists for each stream on radio

and streaming services. According to reports, on Spotify average per stream payout to distributors and rights holders falls in between $0.006 and $0.0084.

Spotify displaying ads varies according to user listening pattern and varies in size and type. It

displays ads in form of Sponsored Sessions, display, overlay, sponsored playlists, audio video

takeovers and branded moments.

Sponsored sessions are those sessions where Spotify feature its own ad to offer uninterrupted entertainment in exchange of a video. These sessions mostly featured in mobile apps and desktops in several countries. Display ads are displayed and clickable at the bottom of the app interface shown for 30 seconds. After some engagement with the app when you will return to the app after a short break, these ads are overlays shown to you and there are lesser chances to be missed out. Video takeovers are commercial ads shown between songs only in desktop and mobile apps. Branded moment is an advertising strategy which focuses on to target right

audience at the right moment. For example, A videogame brand can target its audience when the users indulge in gaming and tune in to gaming playlist in Spotify.

A music streaming service with the most reverential algorithm -Spotify generated revenue of

more than 1.98 billion euros in third quarter of FY 2020.

Listen to podcast here