Spotify’s revenue represented 23% of the global music market in 2016 and 30% in 2017 5. In 2016, global music revenues reached its highest annual growth rate in 20 years, increasing 6% to reach $15.7 billion. Spotify’s streaming model was a key driver of the music industry’s inflection point from 2011 to 2017, the streaming category grew from 9% of revenues to 72% 4. Sixteen years of annual revenue declines coupled with poor and unreliable customer experiences in pirated music created a market where both publishers and consumers were receptive to a new solution. The first wave of internet-based music services (Napster et al.) facilitated piracy and illegal digital distribution, significantly reducing global music revenues, which declined by 40% from $23.8 billion in 1999 to $14.3 billion in 2014 3. As Spotify enters a new phase of growth post-IPO, the company will be focused on leveraging data to further enhance its platform, growing its customer base via expansion into new markets, and achieving profitability.
Spotify’s streaming access model reversed the industry’s declining revenue trend, unlocking revenue and adding value for consumers, artists, and all players in the music ecosystem. From 2015 to 2017, the company increased revenue to over $5 billion (a 45% 2-year compounded annual growth rate) while expanding gross margins from 12% to 21% 2.
Founded in 2006 in Sweden, the company has 71 million paying subscribers and 159 million MAUs across 61 markets as of Decem1. Spotify is the world’s largest music streaming subscription service, and has played a key role in transforming how consumers experience music by offering unprecedented convenience, accessibility, and data-driven personalization to drive discovery and engagement.
Please read the important disclosures at the end of this document.
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