Spotify occupies the top spot in the music streaming Industry
September 9 2021 - Team Stockal
After we recently covered Netflix and Disney’s video streaming battle, we would now like to look at the other streaming battle that’s heating up: The music streaming industry.
Global music streaming industry to grow to $20 billion by 2024E
The global music streaming industry witnessed steady growth amidst the outbreak of the pandemic across the globe with more people staying at home. The trend is set to continue with a further increase in the use of music streaming apps. The music streaming industry is forecasted to grow to $17 billion in 2021 and is projected to grow at an average of 6% from 2021-2024E. Besides, several celebrities and singers are streaming their performances for all their fans who are stuck at home and this is the reason why the music streaming industry is not impacted adversely by the ongoing Delta variant of the pandemic as well.
Exhibit 1: Worldwide Music Streaming Market Size (2020-2024E)
Data as of Q1, 2021| Source: T4.ai.com
Regionally, North America is likely to account for one of the leading shares of the global music streaming market, largely due to the presence of several localized radio stations, expansions through collaboration with renowned artists and increased adoption of several music streaming services.
Substantial improvement on the internet bandwidth and increased prevalence of handheld devices largely contribute to music streaming industry growth
The increased prevalence of several handheld devices like tablets, smartphones have drastically contributed towards the revenues of the music streaming companies. Rising disposable income, an increase in the number of consumers opting for paid subscriptions and a likely substantial improvement in the internet bandwidth, are some of the key growth drivers for the global music streaming markets in the years ahead.
Spotify, Apple Music and Amazon Music together account for over 60% of the market share
Streaming as a whole has grown in 2020, up by 30% from 2019. The music streaming industry is largely concentrated among a few streaming platforms. Spotify still remains the market leader with a 32% market share and the company has maintained a share between 32%-36% every quarter since 2015. This is followed by an 18% share by Apple Music and 14% by Amazon Music as of 2020. Tencent Music controls about 11% of the subscribers in the music streaming industry despite being available almost exclusively in China. (Graph below)
Exhibit 2: Global music streaming market players (2020)
Source: Data taken from MediaResearch.com, 2020
Spotify is more than a sizeable catalogue of tracks and podcasts
When Spotify (SPOT) was launched in 2008, few would have thought that this company would eventually grow into the world’s leading music platform. The company has a library of more than 70 million tracks and 2.2. million podcasts. It comes as no surprise, therefore, that it also has over 365 million users globally. Spotify is more than just a sizable catalogue of tracks and podcasts. In 2013, the company roughly had about 30 million active users (Graph below) and 8 million premium subscribers. Since then, the company’s subscriber base has grown manifold to reach 345 million active users and 155 million premium subscribers by the end of 2020.
Exhibit 3: Spotify’s worldwide Monthly Active Users (MAUs) and Premium Subscribers at the end of 2020 (in millions)
Source: Statista.com Data as of the end of Q4, 2020
Spotify’s growth shows no sign of slowing down
- Spotify’s worldwide ad revenues are likely to increase by 29.6% to reach $1.10 billion by 2021. During the latest quarter, its ad-supported revenues were particularly strong growing at 110% year-on-year to 275 million Euros. (Graph below)
- The strength in ad revenues was led by the Direct and Podcast sales channels, along with contributions from the Megaphone acquisition, the exclusive licensing of the Joe Rogan Experience and Higher Ground.
Exhibit 4: Spotify’s ad revenues worldwide, (2019-2023E)
Source: Data as of March 2021, InsiderIntelligence.com
Key Developments in Products and Platform during the recent Quarter
- In June 2021, the company soft-launched Spotify Greenroom, a redesigned version of Betty Lab’s Locker Room app as part of the company’s entry into the live audio space. This mobile app basically allows users to join or host live audio rooms and optionally turn those conversations into podcasts.
- The full commercial launch of Spotify Greenroom is expected later this year with an initial focus on sports, pop culture, music and entertainment.
- As part of the company’s Open Access platform strategy, the company announced several new partnerships aimed at opening the platform to third-party paywalled content with the goal to become the world’s leading audio browser.
- In May 2021, the company partnered with Storytel – the World’s leading audiobook streaming service. This is likely to give Storytel subscribers the ability to enjoy their library of audiobooks on Spotify.
- On the product side, the company introduced a new mini player experience that allows listeners to share, explore and discover audio from Spotify directly within Facebook. (Without switching between apps)
- On the Apple Watch, the company rolled out the capability for users to download playlists, albums and podcasts to the device.
- On the video podcast footprint, the company expanded to Xbox gaming consoles and went live with Spotify X1 integration to Rogers Communications customers in Canada.
On the restructuring front, the company recently announced $1 billion of share buyback as artists call for fairer compensation. The Repurchase of shares is likely to begin in Q3 2021 and the stock was seen trading higher post this announcement as investors approved the buyback.
Spotify accounts for 165 million paid subscribers as of Q2 2021
The Swedish company continues to maintain its lead among the music streaming companies with 165 million paid subscribers worldwide as per data from its recent quarter which is ahead of Apple Music which is at 78 million and Amazon Music which has 63 million subscribers. YouTube, which includes both YouTube Music and YouTube Premium, recently crossed the 50 million paid subscriber milestone.
Exhibit 5: Spotify and other key music streaming companies paid subscriber numbers (2021)
Data as of September 2021| Source: Company Financials, Chartr.com
U.S. podcast listeners growth likely to put the company ahead of Apple’s listeners in 2021
Spotify’s U.S. listeners are likely to grow by 10.1% for 2021 to reach 83.1 million. The U.S. podcast listeners are likely to grow by 41.3% to reach 28.2 million by 2021, which is likely to put Spotify ahead of Apple Podcast listeners by the end of 2021. In terms of content, the company had 2.9 million podcasts on the platform at the end of Q2 2021, (up from 2.6 million podcasts at the end of Q1 2021).
Exhibit 6: U.S. Spotify vs. Apple podcast listeners (in millions 2019-2023E)
Source: Data as of Q1 2021, InsiderIntelligence.com
Steady growth seen in Monthly Active Users (MAU)
The MAUs increased 22% year-on-year during the latest quarter to 365 million, but the growth in MAUs was slower than expected primarily due to lesser user intake during the first half of the quarter. However, despite this underperformance, the company added 9 million MAUs in Q2 which drove double-digit year-on-year growth in all regions (graph below) and the company is likely to continue this growth momentum as it moves towards its goal to have more than 400 million global listeners by the end of 2021.
Exhibit 7: Spotify’s Monthly Active Users (MAUs) by region (Q2, 2021)
Data as of Q2 2021| Source: Company Press Release
Premium subscribers grew 20% year-on-year in Q2 2021
The company’s premium subscribers grew to 165 million during the latest quarter (up 20% year-on-year) and ahead of forecast. The company added 7 million premium subscribers in Q2 which drove a healthy double-digit year-on-year growth across all regions while the U.S. premium subscribers are likely to grow by 8.2% to reach 43.6 million subscribers.
In May 2020, Spotify started connecting family members and friends with a new group feature that is ideal for parties. The group sessions of Spotify enable the premium users of the parties to share the control over music in the same physical space which allows up to 100 individuals. This new feature of Spotify is most likely to help people stay in touch whilst maintaining social distance.
Today, most activities at home are tied to services provided on the internet – be it video streaming or music streaming. Music streaming services work everywhere where there is internet access and Spotify has a long-term opportunity to gain during the pandemic and increase the subscriber base by developing new content for customers like podcasts, music videos or lyrics. Spotify’s strong brand presence, its attractive offerings and presence in more than 90 countries along with continuous product innovation and the company’s focus on podcasts have helped the company retain its No. 1 position among its contemporaries in the music streaming industry. Spotify’s big push into podcasts along with multiple acquisitions and exclusive deals with hosts like Joe Rogan and Alex Cooper is likely what sets apart the company from its competitors.