Today, Spotify hosted our second Investor Day, updating the financial community on the progress we’ve made since our direct listing. Additionally, we shared details about how we’ll continue to innovate and grow over the short and long term. The event, which was held at our New York City office, featured presentations by Spotify’s Chief Executive Officer Daniel Ek, Chief Financial Officer Paul Vogel, and members of the company’s global leadership team.
When Spotify went public in 2018, we were a music-streaming company, but we’ve evolved dramatically over the last four years—expanding beyond music to become the leading player in audio.
Throughout the event, Spotify executives highlighted the consistency of our financial performance, our strong momentum, and the potential we see ahead for driving meaningful user, revenue, and bottom-line growth. They also built the case for why our future extends beyond music and podcasting, describing a reality where 50 million artists, writers, labels, publishers, studios, and other creators will be able to manage their businesses and monetize and effectively promote their work to more than one billion users.
At the center is a set of software, services, products, and business models tailored for specific verticals and bundled into a single consumer experience: The Spotify Machine.
Read on for top takeaways from our speakers.
“We’re really investing in building a fantastic multisided platform that has all the ingredients to become one of the truly unique creative platforms in the world,” Daniel shared in his opening remarks. “And based on what we see, we are accelerating our moves to seize that opportunity in the near term. And the value creation opportunity is very high.”
He then outlined at a high level what Spotify has achieved since 2018 and revisited the three key foundations that continue to differentiate Spotify and drive our long-term strategy:
Ubiquity: It’s long been our goal to make Spotify available to anyone on any device. Over the last four years, we’ve gone from approximately 250 partners to more than 2,000 today, with integrations ranging from wearables like watches to all facets of the connected life—including cars and kitchen appliances. Ubiquity has proven to be a significant driver of new users to the platform, with 28% of all our new registrations coming from these partners, up from 14% in 2018.
Personalization: When you ask listeners what they love most about Spotify, more than 81% cite our personalization, or discoverability. That magic ability to introduce a user to their next favorite song and artist. Spotify listeners view this as the reason not only to sign up for our service, but also to stay.
Freemium: The combination of our free ad-supported tier and our premium subscription tier. It gives listeners a chance to try Spotify risk-free, enables Spotify to build a funnel toward establishing a larger and growing subscriber base, and has enabled our expansion into new markets due to our low price of entry—we’ve gone from 65 markets around the world to 183 in just four years.
“We see the opportunity to continue to imagine and explore new verticals across our platform—within audio, but also beyond.” Daniel noted. “And for each vertical, we will develop a unique set of software, services, and products and business models that’s going to be tailored for that specific ecosystem.”
Joining the stage after Daniel, Gustav Söderström, Spotify’s Chief R&D Officer, provided a deeper look into that future from a product point of view.
While there’s much that goes on behind the scenes of the Spotify app, the end result is a single intuitive experience for listeners that brings the world’s audio content together in a relevant and personalized way. And that’s what we’ll continue to do as we add new format verticals, like audiobooks, to the Spotify app.
Gustav also shared how this strategy has been successful over the last few years in compounding our user base. He noted that in 2019 we integrated podcasts into the main app, making them available to over 200M potential listeners. In 2020, we did the same with video podcasts, in 2021 with Live, and in 2022, we’re integrating audiobooks into the main app, making them available to over 400M potential listeners.
Finally, Gustav explained Spotify’s personalization engine, which is shared among all of our content formats. “Investments in this space allow for the personalization engine to get better and better as new formats are added, ultimately giving us a better understanding of every user and how we recommend to them. To a large extent, the value of a service like Spotify is directly related to how much a consumer feels like that service helps them discover new things,” Gustav said. And that’s what Spotify enables. In 2018, we had 10 billion artist discoveries every month on Spotify. Today, there are 22 billion and we’re nowhere near done.
“First and foremost, Spotify is a music company,” Charlie Hellman noted upon taking the mic. “All of our music teams’ strategies ladder up to two primary goals: making a unique and superior music experience for fans, and creating a more open and valuable ecosystem for artists.”
“We are by far the most global platform, the most tapped into local scenes, and the most capable of developing opportunities for artists at scale,” Sulinna Ong shared. “No other streaming service is better positioned to identify, amplify, and help shape culture than Spotify.”
“We are the preferred destination for artists, because we help to take an active role in achieving their dreams and partner with them on thinking outside the box, working together to help them succeed,” Madeleine Bennett said. “By unlocking the ability of any artist—from anywhere in the world—to connect with listeners everywhere, we are tapping into a potential market of billions of people everywhere.”
One of the reasons that we’re the go-to destination for artists is because we uniquely provide them with a core set of valuable free resources, useful for any stage of an artist’s career, that help them get their music in front of the right fans. In addition to these free tools, we’ve invested in building the most performant and effective commercial tools for promotion in the streaming era.
In 2020, we introduced our Discovery Mode program, which is powered by algorithmic promotion and is loved by those who have tried it. From Q121 through Q122, Discovery Mode had 98% customer retention. And in early testing, artists with tracks opted in to the program increased their listenership by an average of 40%. Almost half of that growth came from listeners who had never listened to the artist before.
With Marquee—our full-screen, visual, sponsored recommendation of artists’ new releases—we recently expanded access by rolling out a self-serve buying experience in the U.S. As a result, we doubled the number of new customers from Q4021 to Q122 while maintaining an 85% retention rate. And in Q122, revenue grew 224% year over year.
In addition to helping artist teams promote and grow their audiences on an ongoing basis, we’re also focused on helping them earn in more ways. Beyond music, touring and merchandise are significant pieces of the equation. So we’re building solutions for both artists and fans, all while growing new lines of profit for artists and Spotify.
We’ve integrated listings from top ticketing platforms to sell concert tickets at scale within Spotify. We’ve also enabled artists to sell merch, vinyl, and other offerings directly to fans via their Spotify artist pages through a custom integration with Shopify. And we’ve continued to make great progress with our Fans First program, which uses Spotify data to identify and reward the most passionate fans with exclusive offers, like advance access to concert tickets, exclusive merchandise, or invite-only events. To date, the program has generated more than $300 million in revenue for the music industry.
We also want to open up ways for artists to directly interact with their audiences, creating meaningful engagement and monetization opportunities. One new experience is exclusive live audio rooms where artists host their top Spotify fans. Here, artists can celebrate a special musical moment like a new release and earn revenue by selling merch, promoting concert tickets, and receiving tips—all inside the live room.
“As we diversify revenue streams for artists and identify the best ways to increase spending from a user base that is on its way to 1 billion, we will further enrich artists—even outside of their rapidly growing streaming royalties—and deliver margin impact for Spotify,” Charlie concluded.
