Spotify’s User Growth Continues as Pandora Plateaus

Pandora is the most popular music streaming service in the US. But that will change in the coming years, according to eMarketer’s latest forecast on digital audio listeners.

This year, Pandora will have 75.9 million users in the US, compared with 58.4 million for Spotify. However, eMarketer expects Pandora’s user base in the US will decline slightly throughout the forecast period, while Spotify will see double-digit growth this year and next.

“Pandora’s focus on converting free listeners to subscribers, coupled with much stiffer competition, will keep their overall reach from growing,” said Martín Utreras, eMarketer’s vice president of forecasting. “Meanwhile, Spotify has benefited from being first to market with family plans, offline listening, integrations with other services like Hulu and effective social sharing tools.”

A complicating twist in the digital audio space is the growing importance of smart speakers. The smart speaker market got a little more crowded as Samsung unveiled its first entry, the Galaxy Home, last week. As part of the rollout, Samsung announced a new partnership with Spotify, under which Spotify will become the “go-to music provider” on all Samsung devices, and be fully integrated with Samsung’s voice assistant, Bixby.

In practice, that means Spotify will be part of the initial setup process on any Samsung device, and Bixby will play songs from Spotify when a user asks for music.

The partnership makes sense for Spotify and Samsung. Both companies are direct competitors to Apple in their respective markets, and the move puts them in a better position to challenge the iOS maker.

“A growing number of US households are consuming audio through smart speakers,” Utreras said. “For audio platforms like Spotify, integration and partnerships with those manufacturers will be a key driver of growth.”

Spotify’s IPO was both a success and an uncertain forecast for the future of music

acastro_180213_1777_0005.0Spotify’s initial public offering today was both a success and a tepid forecast for the future of music streaming. The company’s shares closed today at $149.60, up 12 percent from the initial reference price of $132, but down from a high of $165.90 when shares debuted on the New York Stock Exchange this morning. That gives the Swedish company a market valuation of around $26.6 billion. According to Reuters, Spotify shares slid from the opening high due to lackluster confidence in Spotify’s business model, which itself is a symbol of the future economics of the music industry.

Spotify’s unique IPO approach, called a direct listing and one typical of smaller companies in industries like biotech, involves selling shares direct to the public without an intermediary. “Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years,” explained Spotify co-founder and CEO Daniel Ek in a blog post yesterday. “So while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.” Spotify is the biggest company to ever go public via direct listing, and the first on the NYSE.

While Ek says Spotify isn’t raising capital with its IPO, the company is certainly in need of some cash. Although Spotify earns $5 billion a year in revenue, it pays out more than three-fourths of that in royalties to labels, producers, songwriters, and artists. The Big Three — Universal Music Group, Sony Music Entertainment, and Warner Music Group — control a vast majority of that ecosystem, leaving just a small amount of revenue and zero profit for Spotify to recoup from its 70 million paying subscribers. Though Spotify counts nearly 90 million free listeners, it only makes around 10 percent of its total annual revenue from advertising to those free users.

That puts a lot of pressure on Spotify to ensure investors that it can continue to grow, even as Apple Music closes the subscriber gap. Apple’s streaming product is no less economically viable, but the iPhone maker does not at all rely on it to make money, with the company’s vast and robust hardware ecosystem generating a large majority of its record revenues and profits. Though Spotify is cutting its losses thanks to renegotiated deals with record labels, it still loses close to $1.5 billion a year. Spotify has yet to ever make a profit.

If Spotify cannot find additional revenue streams or find ways to turn a vast number of free subscribers into paid ones, the streaming service may not have a bright future except as a kneecapped extension of the existing music industry, the majors of which own about 16 percent of the company as it stands today. But the music industry needs streaming services like Spotify just as much as much as the streaming services rely on labels. That symbiotic, but at times antagonist, relationship forms the pillar of the current music industry. Whatever happens to music creation and distribution in the future, Spotify will surely play a major part, whether or not it manages to transform into a profitable platform

DIGITAL Spotify Hits 140 Million Monthly Active Users After Adding 40 Million in Just One Year

140-mil-users-spotify-CONTENT-2017-840x460Spotify announced today that it has 140 million monthly active users, up from 100 million a year ago.

The music service declined to say how many of the 140 million are on commercial-free subscription plans and how many listen for free with ads. In March, Spotify—which continues to compete in the on-demand listening space with Apple Music, Pandora and others—announced it had 50 million paying users.

“The acceleration of audience growth is allowing us to continue to grow the ads business at a 50 percent year-over-year clip,” said Brian Benedik, vp and global head of sales at Spotify. “Six, seven years into the advertising journey at Spotify, we’re proud of that. It’s tough to do when you get deeper into the journey, but what we’re learning is this idea of understanding people from music.”

Benedik said Spotify’s ad offerings fall into three buckets: audio, video, and sponsored playlists and branded moments.

Video in particular is growing, and Spotify is adding nonmusic content like original series and podcasts to its library. The company is currently testing a discovery feature within the popular Rap Caviar” hip-hop playlist. After a few songs, videos (including episodes of All Def Digital’s Traffic Jams) pop up on the screen. Benedik described the feature as a “test” and also said the company is testing pop-ups promoting Spotify’s original podcasts.

“How can artists—in the case of Rap Caviar—express themselves in different ways?” Benedik said. “Certainly music and audio is one thing, but video and visual expression is something that we’re testing with and that users are interested in.”

At Cannes next week, Spotify is setting up an experience targeted at creatives to show them the ins and outs of the platform. Data is a big part of its pitch. First-party data collected from user IDs like age and gender as well as proprietary data on listening habits underpins Spotify’s ad business for brands including Heineken, McDonald’s and Procter & Gamble, Benedik said.

“We can share very intelligently and clearly: ‘Here’s what’s happening on Spotify,’” Benedik said. “More importantly, we can tell some of these brands how their audiences are behaving on Spotify. It sets the stage for a much different conversation than we’ve ever been able to have before.”

Infographic: 72% of Spotify Listeners Are Millennials. Here’s How They Use the Service

Music streaming services are more popular than ever, and, naturally, no group is leading the charge more than millennials. One of the most popular of those services is Spotify, which provided Adweek with exclusive data to get a better look at this demo. “As the largest global streaming service, we have a deep understanding of millennials from our data on streaming habits,” said Spotify business marketing global director Jeff Rossi. “For marketers looking to reach this highly sought-after group, we understand that millennials are listening more frequently and streaming in more places than nonmillennials, including most often on mobile and desktop as they move from home to school to work. We also see that millennials’ streaming habits are not as impacted by traditional peak consumption periods like prime time or drive time. They are connected all day from the moment they wake up.” pitch-perfect-data-02.png

The Strengths And Weaknesses Of Apple Music

Spotify killer? Or Ping 2.0? Apple today finally announced its move into on-demand music streaming with the unveiling of Apple Music. Now the question is whether Apple Music will be a hit with the public, bringing legions of new users to streaming and stealing from competitors. Or whether it will be another Apple app we stuff in a folder and forget about.

Here’s a comparison between Apple Music and its competitors, plus a deeper look at the positive and negative points from the launch (full article here):music-chart1

Spotify tripled its losses in two years. Is streaming audio in trouble?

spotify-genericThe financial data, revealed in a public document in Luxembourg and reviewed by the New York Times, comes as the company is reportedly preparing to enter the streaming video market. That move could entice more advertising money, which would help alleviate the losses. Spotify blamed the losses on costs associated with product development, expansion and licensing, the Times reported.

Spotify has long claimed that it would be able to achieve profitability once it hits a certain number of paying customers. The fact that its losses seem to grow as it brings in more money seems counter to that notion. It now has 60 million total users, 15 million of which paid for the service. Read full article here.