The financial future of music streaming is rosy, at least according to forecasts by Spotify, the first platform in the world, listed on the New York Stock Exchange: the goal is 1 billion users and 50 million creators by 2030, with the gross margin of music business which will expand from the current 28.5%, first to 30% and then to 35%. Numbers that come out of Spotify’s second Investor Day held on the afternoon of June 9 with CEO Daniel Ek and CFO Paul Voge. Innovation and growth are the key points, along with a strategic roadmap to become the ideal platform for creators around the world.
A platform for 50 million creators
“We are accelerating our growth path to become a platform capable of entertaining, inspiring and educating more than a billion users worldwide and, just as a platform for creators, we will provide the infrastructure and resources that will enable 50 million of artists and creators to grow and better manage their businesses and projects, monetize their work and effectively promote it, ”Ek said. In short, the Swedish streaming company aims to be a unique creative platform of its kind and to consolidate itself as a reference place for some of the greatest artists, creators, authors and editors.
More than a billion in cash flow since the listing
Since going public, Spotify has met or exceeded its forecasts for both free and premium users by more than 90 percent. Revenue grew in line with user growth, and gross profit grew even faster, more than tripling over the past five years. Spotify generated positive cash flow each year, with over 1 billion cumulative free cash flow, including by investing in new areas such as podcasting. Daniel Ek’s creature also recorded a sharp reduction in the dropout rate in the Premium business, from 5.5% at the end of 2017 to 3.9% at the end of 2021. Ubiquity, personalization and freemium remain the cornerstones of the doctrine of Spotify which has the ambition to double its numbers, surpassing the 1 billion users and 50 million creators by 2030.
Gross margin of music towards 35%
Although Spotify’s core business is mainly music, the platform is also shifting its interests towards more vertical business models, expanding and integrating the listening experience of users. The three vertical sectors – music, podcasting and audiobooks – are currently in different stages of development and are opening up to new opportunities. On the music side, it’s a great time to stream, and no other service is positioned like Spotify for its ability to identify, amplify, and help shape music culture. Diversification is being worked on (with new functions: from merchandising to concerts), with the hope that the gross margin of the music business will expand from the current 28.5%, first to 30% and then to 35%.
Podcasts and audiobooks
In the focus on podcasts, it emerged that at the moment the platform monetizes 14% of all hours listened to. Investments in original podcast content are the platform’s hallmark. According to Spotify estimates, podcast growth margins are expected to exceed 30 percent. As for audio books, the market is growing 20% year on year. And Spotify is already considering reinterpreting the format, just like it happened with podcasts.