Spotify has a 30% market share, which is double that of its closest competitor. This is significant for a music streaming service where, unlike OTTs, duplicate subscribers are rare.
To put it more clearly, it has over 381 million subscribers and 170 million paid subscribers. However, it is not generating consistent revenue from the audio streaming sector. Spotify pays about 70% of its music streaming revenue for music copyrights.
Below is a flow chart of Spotify’s financial statements. (Click on the image to see the original text.)
Competitors: We do it as a side job.
Competitive Rivalry: Spotify is competing with big, well-capitalized companies like Apple, Amazon, and Google , which do not rely on streaming audio for their revenue. They offer music streaming as a service.
Various attempts and failures: Spotify has tried to expand into various areas such as podcasting, concert and ticket sales, and high-quality audio, but most of these efforts (in terms of financial investment) have been unprofitable. → Some new businesses have even resulted in large financial losses. ( Article )
Job cuts: Spotify reportedly laid off more than 2,300 employees last year alone in a bid to improve profitability, a move aimed at cutting costs and increasing efficiency.
Market structural problems
Limitations of music streaming: Music streaming services cannot avoid low margins due to high royalty fees and competition. This is a common problem not only for Spotify but also for other audio streaming services.
The Podcast and Audiobook Challenge: Spotify has entered the podcast and audiobook markets, but is struggling to generate significant revenue in these areas as well.
So how do you make money?
Spotify is currently making money from audiobooks and podcasts. However, the current outgoing money is too much. Changing the current pricing policy may be a solution. However, this will not solve the structural problem.
As mentioned earlier, unless you produce your own products (services) with high margins, it is difficult to make a profit in this structure. This is similar to the current AI startups. You need to gather users and eventually decide how to make money here. (Traffic and API costs are more damaging than profits. If you have users but cannot make money, you will fail...)
Despite its strong position in the audio streaming market, Spotify has struggled to secure profitability due to high royalty fees and difficulties in expanding into various businesses. However, the company is aiming for long-term profitability through diversification of its business model and improvement of efficiency. No one knows whether this strategy will succeed... I recently met someone who said that if you gather people after a long time, it will work out somehow, but I think this is a tactic that worked in the early 2010s. The square business is no longer effective. Users have become too smart and have a high level of understanding of IT services. If traffic = profit , it is no different from advertising on a blog. In the end, you have to bring in customers and then run them internally, but I think now is the time to focus on products, not marketing. If the product net is tight, it will be meaningful to bring in customers through marketing and securities.
Personally, I thought Toss's foreign exchange account strategy was really amazing this time. It randomly gives various foreign currencies such as dollars, yen, and rupees, and it's almost under ten thousand won. And the exchange fee is also not that much unless you exchange tens of thousands or hundreds of thousands of dollars, but I successfully opened a foreign exchange account with this. Now, the accessibility to various financial products using foreign exchange, and even investment products and securities, has improved a lot. Considering that financial companies sometimes spend tens of thousands of won in ARP to open these accounts, Toss's marketing or method is also excellent. (The downside is that many services that give money say, "Let's give 1,000 won each" after seeing this... Only cherry pickers gather and the indicators are destroyed. Retention and all, they only collect useless user data... If someone makes this decision, let's stop them. Or, if they don't like it, let's leave them alone.)
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https://www.netflix.com/kr/title/81186296