Music streaming is a competitive industry. Therefore, all additional operating expenses must be covered from the remaining 30%, with the remaining 70% going to music labels to be divided between songwriters and artists. Jimmy Iovine, a co-founder of Beats, claimed that there were no profit margins in the industry after joining Apple.
For Apple Music, it is unimportant because it is only another feature of the Apple ecosystem that helps the business sell products like Apple Watches and HomePods. But for a while, Spotify’s only source of income was from music streaming. The switch to podcasts has yet to be successful, and the Spotify Car Thing was an unsuccessful foray into hardware.
Spotify has already crossed 200 million paying members for the first time. The company claimed that, among other things, marketing initiatives, the holiday season, and high growth among Gen Z customers had all helped it.
When the year was over, there were 489 million monthly users, including subscribers utilizing the free version. According to Spotify, 500 million users should be reached by 2023.
The earnings disclosure comes a week after Spotify revealed that layoffs would affect 6% of its workforce or just under 600 workers. Spotify’s most recent earnings report indicates that, like other internet businesses dealing with the same economic slowdown, its financial situation has remained relatively stable recently. However, it has been recently noted there might be more to the reasons for these industry layoffs than simply profitability.
Making money has always been a challenge for Spotify. Since its debut, it has lost money practically every quarter. However, the company’s quarterly loss for Q4 increased by over 700%, from €39 million ($42 million) to €270 million ($292 million).
There is a lot of fine print in that “Spotify paying subscribers” label, which contributes to the epidemic’s increased demand for at-home entertainment, which fell when lockdowns were lifted. They include:
- Reduced accounts (e.g., for students)
- Subscription rates are meager in various nations (sometimes just a few cents)
- Users with monthly subscriptions starting at $0.99
The breakdown of those paid subscriptions is only known to Spotify.
Although Apple Music’s growth may have stopped or increased mainly through the Apple One subscription, the corporation is probably not worried about it. The Cupertino company will continue to benefit from its excellent margins on the gear users use to access its streaming music service as long as it covers its costs.
Although comparable subscription data are not just available for competitors Apple Music and Amazon Music, the most recent information obtained by Music Ally, Apple Music had about 60 million paying subscribers as of 2019, while Amazon Music had 55 million as of 2020. Spotify is widely regarded as the world’s largest music streaming service.