The Swedish company, listed in New York and governed by Luxembourg law, dominates the global music streaming market with about one-third of the market share. It significantly outpaces competitors such as Tencent, Apple Music, Amazon Music, YouTube Music, and NetEase.
Spotify closed the 2024 fiscal year with a revenue of $15.7 billion. The number of monthly active users grew by 12% to reach 675 million, of which 263 million are premium subscribers (up by 11%). Its revenue primarily comes from Premium subscriptions, while advertising accounts for 11.8% of its income (stemming from non-paying members).
In 2024, Spotify increased its prices twice without affecting demand. The platform indeed has significant pricing power – the ability to make customers accept price hikes – linked to its market leadership and regular improvements to its services. This year, Spotify implemented new AI-based features to provide more personalized recommendations. The attractiveness of subscriptions is also meant to increase the customer base and limit the churn rate with additions like audiobooks, which could be the next key asset for expansion. Indeed, audiobooks – like the addition of podcasts several months ago – allow targeting a new clientele that is not solely attracted by music. Moreover, unlike music, where record labels capture a large portion of the profits, Spotify retains a larger margin on audiobooks.
In such businesses, the race for size is crucial to maintain a viable long-term model. Spotify has thus managed to generate enough revenue to turn a profit. Cost control has been decisive, and growth – in both subscriber numbers and prices – has contributed to this success.
The outlook has also been welcomed by the market. Spotify is well-positioned to achieve another year of continuous growth and margin improvement. For the first quarter, operating profit is expected to be €548 million, a level significantly higher than analysts' forecasts. To achieve this, cost savings will continue, particularly in marketing.