BusinessOct 26, 2022
The Playlist and a recent earnings report highlights Spotify’s growing problems
Digital Audio
Victor Lei
Discover
Netflix recently released The Playlist — a short series re-enactment of Spotify’s founding story. It’s really good. Go watch it. The series highlights one of Spotify’s many problems: a lack of profitability.
Yesterday, Spotify reported earnings that sent its stock down 13%.
It doesn’t seem like they’re closer to solving the problem. Sales were hit by a slowing ad market, and higher growth spending hit the company’s profitability.
In recent years, they’ve invested heavily into podcasts and audiobooks — two higher profitable areas. Spotify is cnonsidering raising prices next year after YouTube and Apple already hiked theirs.
Artists are also barely making a living on Spotify — another problem highlighted in the series. Artists were paid $0.0033-0.0054 per stream. That’s $5,400 per 1M streams in the upper range.
Record labels with song rights have long had power over Spotify and artists. It’s a tough business where the artist gets paid only once everyone else dips their hands in the pot.
Since going public in 2018, is down 42% — far underperforming the market. Spotify has a dominant 31% market share, with Apple Music (15%) and Amazon Music (13%) trailing — but don’t confuse a good product with a good business.
Now there’s also an incoming threat from TikTok.
The Average Joe: “We like it in easy mode, and Spotify has a really challenging road ahead. Unless Spotify’s record label situation improves, we’ll take our chances elsewhere.”
