About Spotify

Spotify is one of the leading audio streaming platforms, providing users with access to an extensive library of music, podcasts and other audio content. Launched in 2008, Spotify has become one of the most popular music streaming services in the world. Users have access to millions of songs and podcasts across a variety of genres, can create playlists, discover new music and enjoy recommendations based on their preferences. The platform offers free ad-supported services as well as premium subscription-based services, allowing users to listen to music offline, skip tracks and experience ad-free streaming.

Music streaming to be the main source of revenue in 2022

A report released by the International Confederation of Societies of Authors and Composers (CISAC) states that in 2022, streaming will become the primary source of revenue for songwriters and music producers, growing by more than a quarter to $11.44 billion. Digital royalties saw a remarkable 34 per cent increase to reach more than USD 4.2 billion, driven by the growth of music and video subscription services. Streamed collections have doubled since before the pandemic, accounting for 35 percent of total earnings for music creators, surpassing revenues from television and radio. Licensing fees for live performances also saw a 69.9 percent increase to more than $2.68 billion, but remained below 2019 levels, suggesting a recovery from pandemic lows.

AI will have an impact on profits

However, the report warned of future uncertainties related to consumer spending and the financial constraints artists face when touring. CISAC president Bjorn Ulvaeus highlighted the potential impact of AI on future profits in the music industry and urged creators to engage in strategic collaborations with tech firms and lawmakers.[1]

Free access to audiobooks in the UK and Australia

Spotify has said that users who subscribe to its premium services in the UK and Australia will now have 15 hours of free audiobook access each month, with plans to extend the offer to the US later this year. Last year's introduction of the audiobook service in the U.S. marked a direct challenge to Amazon's Audible. Spotify's long-term goals include reaching one billion users by 2030 and achieving $100 billion in annual revenue.1 Despite previous promising gains from podcasts and audiobooks, the company in July raised prices for its premium plans in several countries, including the U.S. and the U.K. Access to its audiobook catalogue of more than 150,000 titles is now included with an existing Spotify Premium subscription.[2]

Spotify will use Google AI

Spotify recently expanded its collaboration with Google Cloud to leverage the power of large-scale language models (LLMs) to analyse user preferences across podcasts and audiobooks, making it easier to tailor recommendations to customer preferences. These AI-powered models, such as OpenAI's ChatGPT and Google Bard, are trained extensively on a variety of data to generate content. Google Cloud owns various LLMs such as PaLM 2, Codey, Imagen and Chirp, trained on text, code, images, audio and video. Spotify is leveraging its early adoption of AI for music recommendations and is now focused on expanding the use of these LLMs to improve suggestions in non-music content offerings, specifically podcasts and audiobooks. By expanding its footprint, the streaming platform is looking to secure revenue from a variety of sources, as it has already recently indicated expectations of lucrative returns from its strategic expansions into podcasts and audiobooks.[3]

North America is a major player in this sector

According to Omdia's projections, North America is poised to maintain its leadership position in global music spending, despite the widespread adoption of streaming platforms. By 2027, subscription-based models, particularly streaming services like Spotify, are expected to account for more than 60 percent of global consumer revenue, up from 58 percent in 2022.

North America as a leader?

North America is projected to maintain its dominance and account for 43.2 percent of global recorded music purchases in 2027, down slightly from 43.9 percent in 2022. Meanwhile, Europe is expected to maintain its second place position, accounting for approximately 27 percent of global music spending.[4] [2]

Spotify's share price movement over the last 5 years (Source: Google Finance) *

Olivia Lacenova, principal analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results

1,2][1,2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate or based on the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.reuters.com/technology/music-streaming-was-2022s-top-moneymaker-songwriters-composers-2023-10-26/

[2] https://www.investing.com/news/stock-market-news/spotify-premium-to-include-free-access-to-audiobooks-in-uk-australia-3189671

[3] https://www.reuters.com/technology/spotify-use-googles-ai-tailor-podcasts-audiobooks-recommendations-2023-11-16/

[4] https://www.investing.com/news/stock-market-news/spotifys-growth-slows-as-north-america-continues-to-dominate-global-music-spending-93CH-3222626