How Is Spotify Dominating The Music Streaming Industry?
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Raven Ruma
- . January 26, 2023
- . Update: January 26, 2023 10:25 pm
Online music has seen significant transformation in the last 20 years. For thousands of years, people have placed such a high value on music. Over the years, a lot of things have changed. Our love for music hasn’t diminished, either.
And Spotify comes to mind when you think about streaming music. Spotify has currently undergone exhilarating journeys on a roller coaster.
Although it has dominated the whole streaming music market, Spotify still can’t compete with major players like Apple, Amazon, and Google. 130 million people utilize premium Spotify services worldwide.
The early years of Spotify were entirely focused on the European market. The idea was to create a sizable music collection that anyone could use for free.
Thus, the creators’ early years in Europe were spent legally licensing music. Today, Spotify is the business spearheading the quickly growing music streaming industry.
On Spotify, one can discover anyone. Spotify has over 130 million paying subscribers worldwide and has successfully battled against industry titans like Apple, Amazon, and Google while being rated second to Apple in the US.
Since it’s incredibly humble beginnings, Spotify has grown into a $32 billion business. In 2021, Spotify generated $11 billion in US dollars.
How exactly is Spotify dominating this much?
Well-known IT giants like Apple, Google, and Amazon are Spotify’s main competitors. Apple Music, Spotify’s main competitor, has just about half as many subscribers and a smaller global market share. How does Spotify overcome its biggest competitors, then?
1. Advertisement Revenue
By displaying adverts to free users, Spotify generates revenue. In exchange for promoting sponsors’ products, Spotify is paid.
The fourth quarter of 2021 saw a record 15% increase in Spotify’s ad revenue. It earned $448 million. Spotify makes money through podcasts in addition to running ads once more for free plans.
2. Freemium Subscription
First, by providing free music streaming, Spotify attracts a lot of users. The free tier offers access to all necessary functions. But there is advertising as well. That changes when you upgrade to Premium.
For $9.99 per month, you can access the music online or without advertising. Many users believe that premium drastically alters the streaming experience.
The information is self-evident. 180 million paid subscribers to Spotify earned $2.6 billion in revenue in the fourth quarter of 2021. That is 85% of Spotify’s revenue!
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Rise of Spotify In Music Industry
Having been founded in 2006, Spotify debuted in the US in 2011. It started with a free beta test that was invite-only and got rave reviews right away. But it was a difficult journey to the top.
Rights were being purchased. It was to convince people to register on the platform. It was difficult for Spotify to guarantee they could secure the content, especially at that time.
One reason for the company’s slow entry into the American market was music rights. Since its launch in 2018, Spotify has invested 9.8 billion dollars in its intricate business.
They made that uncertain bet at the time. Major firms were attracted by the startup’s clear breakthrough because it was on to something.
Nowadays, every major technology company offers a music streaming service. Its replacement, Apple Music, took the place of iTunes.
One of Amazon’s products is Amazon Music. Google originally made available YouTube Music, then Google Play Music.
Major online rivals noticed Spotify’s quick rise and later created their own music streaming services, including Apple Music, YouTube Music, and Amazon Music.
Spotify has kept its position as the top audio streaming platform and its subscription prices, despite competition and variable stock market performance.
One of Spotify’s main features is machine-generated mixes, such as Discover Weekly, a personalized playlist with weekly updates.
Users attracted to these automatically generated playlists choose Spotify over Apple, Amazon, and Google as a result, providing Spotify an advantage over its rivals.
After their free trial has ended, consumers are required to pay for access to more restricted platforms like Apple Music. When Apple Music came out, the corporation tried to remove Spotify’s free version.
For consumers, being free makes perfect sense, which is a major reason for Spotify’s present level of popularity. For musicians, though, free is not the best option.
Advertising is less expensive than premium subscribers are. On Apple Music and Tidal, you can sign up for a free trial, but after that, you’ll have to pay.
Artists started to question why they weren’t earning as much money from Spotify as they were from record sales and downloads as it became more and more popular.
Spotify Music & Audio Library
Additionally, the success of Spotify’s freemium revenue model is crucial. Simply said, individuals favor the possibility of listening to music for free without having to pay up advance.
The Spotify music catalog is pretty extensive. Even Jay-Z, who owns Tidal, a competitor of Spotify, has music available there.
Spotify is ultimately the first music streaming platform. Apple Music was unveiled in 2015, more than ten years after Spotify. So, it’s clear that getting started early was a good idea.
By the end of 2019, there will be 60 million paid subscribers to Apple Music worldwide. With 55 million subscribers worldwide, almost all of them are paying customers, Amazon Music. Tencent, a Chinese company, has 124 million paying customers, compared to 39.9 million for Spotify.
Free to premium was the subject. Conversion was crucial, and Spotify was responsible for getting it going.
After their free trial has ended, consumers are required to pay for access to more restricted platforms like Apple Music. When Apple Music came out, the corporation tried to remove Spotify’s free version.
With the help of podcast advertising, Spotify hopes to raise its profit margin. Podcast marketing will cost $1.35 billion in the US alone in 2021. In conclusion, there is huge potential for ad revenue in the podcast sector.
To boost its profit margins, Spotify is making a huge wager on podcasts. Strangely enough, the criticism Spotify is currently facing is directly related to their entry into the podcasting sector.
While being the hero who saved the music industry, Spotify is nevertheless viewed by the majority of people as a supervillain who is depriving musicians of their revenue.
Shortly after podcasting deals were struck, the global epidemic started to have an influence on the economy. However, Spotify was one of the few companies to make it through the recession.
In actuality, the price of Spotify shares increased by 70% between January 2020 and June 2020. Since the lockdowns forced people to stop listening to the radio, they profited from Covid, and while they were stuck at home, they found Spotify.
Conclusion: The Dominance of Spotify
Throughout the process, Spotify has remained at the top and enjoys a significant lead over competitors. If Spotify wants to stay at the top, it must continue to be quick and nimble.
Despite all of the pushback, Spotify has been a huge success. They deserve praise for seizing market control by competing with the top technology companies on the planet. Spotify just expanded its service to 65 more countries.
