How does Spotify make money through the Spotify business model

Artists & record labels were quick to pounce upon the emergence of technology. First, it was iTunes, then youtube & now dozens of music streaming apps. With a user base as big as 179 million, it was evident that all the leading record labels & artists would want to release their tracks on Spotify along with the worldwide release elsewhere. Spotify business model is an interesting case study in the digital music streaming industry. What started from just music has reached new heights today. They also stream videos which effectively eliminates your need to launch the music video of the track from youtube. Soon they launched other podcasts. Stand-up comedians like Patton Oswalt, Russel Peters, Aziz Ansari, Amy Schumer started to release their acts on Spotify. But the real game changer was the releases of audiobooks on Spotify. They collaborated with celebrated writers & celebrities who narrated best sellers on Spotify. We all agreed on the fact that technology will never challenge books, but Spotify did & they called it the "word".

Now, let’s see how does Spotify make money through the Spotify business model. Spotify makes money from two major sources.

While it continued to emerge as the most popular music streaming platform on most parts of the world, Spotify struggled to generate revenues. For the most part of its initial journey, they remained in a significant loss. As the wired reports, Spotify made more than 40 million euros for labels, which was more than any other retailer, offline or online.

All this apart, they continued to report annual revenue losses even years after its growth. Spotify was not a profit making company till 2017, some reports suggest. So, how does Spotify make money!!

As reported in 2012 by TechCrunch, Spotify recorded a $60 million loss in the year 2011. But the year 2012 brought some good news as they were on their way to hit a $500m revenue mark half way into the calendar year. This was due to the $100m investment they reportedly received to enter the US market, with the help of the recruitment of Sean Parker.

Spotify has always struggled to make money as the advertisement revenue & membership premium fees could never match the astonishing royalty amount they were required to pay to the leading record labels. As per a report from The Wallstreet Journal in 2015, Spotify made a sum of over $500 million from a fundraising campaign. This was still not enough as they continued to record losses every financial year.

Through advertising in the free subscription: Spotify not only earns from banner advertisement but also uses audio advertisement for earning money. Spotify supports different kinds of advertisement such as sponsored sessions, audio, video takeovers, overlay, advertiser pages, and branded playlists. These advertisements are different in their size, type or user engagement.

Through paid subscription in premium version: In this premium version of Spotify, there is a 30 days free trial priced at $9.99 per month. As this is a premium version, there is no advertisement and user can play any song on demand as well as discover new music, find and hear playlist, listened to tunes picked by radio feature of Spotify, create and edit playlists. There are options to listen to HD music at 320 kbps offline; skipping tracks as well as using the Spotify app on their mobile device as a computer remote are the other features possible.

take a look at a customizable ready-to-go Spotify clone script for your start-up.

As compared to other online music streaming application, Spotify has a smaller impact on the market. Moreover, subscription fees are also high compares to other applications. But Spotify has helped millions of its users to connect with each other over their common love for music. It also helped different music to reach in a different part of the world. The platform of Spotify uses factors like country, the currency value of country, contracts, artists’ value etc. to calculate royalty per stream.

Spotify is critical to the revival in the music industry but its business model is brutal to earn enough money in this competitive world. Technically, it has not generated enough profit but Spotify, founded in Sweden, by founders Daniel EK and Martin Lorentzen; is now one of the world’s most popular music streaming application with over 159 active users as of December 2017. So, here we are done with How does Spotify Make Money. They started Spotify in 2006. Spotify’s Business Model is welcomed by the music industry which has suffered losses in revenues and album sales due to music piracy over the internet. Spotify application came from the idea of combating music piracy.

Spotify is trying to restore much of the lost value by convincing music faces to spend more on music, having paid out more than $3 billion so far its website said. According to the New York Times, that business model launched the streaming service off to a rocky start, as it posted losses of $197 millions in 2014, despite having ranked in 41.3 billion in revenue. The company persists that it will turn in profit when it gains a certain amount of subscribers.

How does Spotify Make Money?

Specialized in eCommerce, marketplace, on-demand, startup, peer-to-peer, business model