Spotify has 600M users, but struggles to turn a profit

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By Dan Sears

Spotify dominates the music-streaming market, with nearly 600 million monthly active listeners and a 30% market share, but that hasn’t translated into turning a profit for the Stockholm-based company.

Though Spotify has a footprint more than twice that of its next-largest competitor, Apple Music, the leading audio-streaming company reported a net loss in 2022.

“Spotify has consistently led people to believe they would have a profitable business that would justify their valuation and used capital raised on the back of that valuation to chase rainbows,” Richard Kramer, founder of tech-focused equity-research firm Arete Research, told the Wall Street Journal. “None of those rainbows were captured.”

The company is set to report its fourth-quarter earnings, as well as its financial results for the 2023 fiscal year, on Feb. 6.

Spotify outperformed most of its projections for the first three quarters of 2023 — attributed mostly to the $1 boost across all of its subscription tier.

Spotify dominates the music-streaming market, with nearly 600 million monthly active listeners and a 30% market share, though the company has struggled to turn a profit in recent years. Diego – stock.adobe.com

Spotify’s profits haven’t aligned with its market streaming dominance, which the Journal attributed to the handsome chunk of royalties the firm has had to dish out to audio-rights holders.

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It is obligated to pay whichever individual artist or organization that owns the rights to a song per stream, which works out to an approximate revenue split of 70/30, The Journal reported.

The business model means that as of 2021, Spotify has paid out roughly $7 billion in royalties, Forbes reported.

Billboard estimates that after topping Spotify’s year-end “Wrapped” charts, mega-star Taylor Swift — whose blockbuster 2023 was capped off by winning Time Magazine’s “Person of the Year” — will take home over $100 million from Spotify.

The outlet calculated the sum based on Spotify stats that showed Swift had racked up 26.1 billion streams globally between Jan. 1, 2023, and when its “Wrapped” charts were released on Nov. 29.

Spotify implemented three rounds of layoffs in 2023 that reduced the company’s headcount by 2,300. The latest reduction cut 2,300 jobs, and CEO Daniel Ek said it needed to take “substantial action to rightsize our costs.” Getty Images
As part of Spotify’s $1 billion investment in podcasting, it paid Meghan Markle $18 million for “Archetypes,” which failed to gain popularity. Spotify

Meanwhile, Spotify has sought to spread its wings into other forms of audio streaming, like podcasting, though it’s been a costly endeavor that hasn’t paid off.

When the company slashed 200 jobs in June 2023 — 2% of its workforce at the time — it said that it was spending too much money. Shortly before, Spotify reportedly cut an $18 million check for Meghan Markle to headline a podcast called “Archetypes,” though it struggled to nab a top spot on the Spotify charts, which was blamed on staffers’ error in judgment.

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Markle’s multimillion-dollar payday was part of a larger, $1 billion bet on podcasting that has seen top podcasters Joe Rogan, Alex Cooper and Emma Chamberlain bringing in significant windfalls as Spotify has had to lay off staffers behind the scenes in an effort to accommodate its investment.

Over the course of 2023, Spotify implemented three rounds of layoffs that reduced its headcount by about 2,300.

Top podcasters Joe Rogan, Alex Cooper and Emma Chamberlain bringing in significant windfalls thanks to their lucrative Spotify contracts. Getty Images

The most recent layoffs slashed 17% of its staffers.

Around the same time, Spotify’s chief financial office Paul Vogel announced he’d be stepping down, effective March 31.

Rogan’s rumored to take his wildly-popular “Joe Rogan Experience” podcast — which draws an estimated 11 million listeners per episode — to a rival platform when his exclusive licensing deal with Spotify expires sometime early this year.

It’s unclear when exactly Rogan’s contract is up, though Spotify reportedly paid Rogan $200 million in 2020 as part of their agreement, but could be forced to dish out more to keep the lucrative podcast host.

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Representatives for Spotify did not immediately respond to The Post’s request for comment.

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