Market Trends
How does Spotify stack up to the competition?
As the music streaming industry grows in popularity and success so do the number of competitors for Spotify. With that said the overall popularity increase of music streaming has helped grow Spotify’s user based. Spotify dominates paid streaming, with more than 40 million customers, most paying $10 a month for a library of millions of songs. Last year sales almost doubled, to $2.2 billion. (Pandora, which has about 80 million users, reported sales of $1.2 billion). Spotify is valued at $8.5 billion. |
The main competitor in music streaming is Apple Music. Apple Music launched in 2015 and set record level success reaching 10 million subscribers in just 1 year – something that took Spotify 6 years to accomplish. Both Apple Music and Spotify are now adding approximately 1 million paying users per month. At the end of 2016 Apple Music will have about 20 million subscribers and Spotify will have 40 million. While Spotify is more established, Apple Music has 2 things going for it that make it a force to be reckoned with. First, Apple Music is already in approximately 50 more countries than Spotify. Second, Apple Music has the ability to inject large sums of cash into the service without having to rely on funding rounds to finance the business.
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Spotify has financial backing from the likes of Northzone, Kleiner Perkins Caufield & Byers, Accel Partners and DST and now boasts of having close to 100 million users in about 60 markets. Spotify recently raised $1 billion in convertible debt from investors including private equity firm TPG Capital and hedge fund Dragoneer Investment Group. Spotify plans to invest heavily in research and development.
In order to stay agile in the market Spotify has started expanding its service offerings. Some successful ventures include partnering with Headspace, a digital health and happiness platform to offer positive psychology and mediation podcasts. Spotify has also started to create original series like Drawn and Recorded, a 10 episode podcast exploring legendary stories, often never before told, from the history of popular music. The latest venture, Spotify for Business is expected to help Spotify reach a larger audience base and generate more revenue. |