Streaming music giant Spotify has been under fire recently. While their number of memberships continues to grow, their stock isn’t doing quite as well. In their 3rd Quarter report, they shared that monthly active users grew to 191 million, and global subscriptions grew to 87 million. However, they still are burning through tons of money, and their investors want answers. Even after the news broke of Spotify’s $1 billion stock repurchase program, that didn’t impress everyone.
During their last earnings call on November 1, CEO Daniel Ek attempted to answer some difficult questions. The company’s goal is to maintain their profits for more than just one quarter, and they believe this can happen through their”Spotify for Artists” program. Ek believes that through deciphering who an artists’ true fans are, they can capitalize on their “freemium” business model.
In response to a question regarding charging artists for access to Spotify services, Ek responded:
“Our strategy in our marketplace side of the business is the same as we have on the rest of Spotify, which is it’s a freemium business, meaning there will be a certain amount of products which artists and labels can get for free, and there are others which we will charge money for. So, that’s an evolving strategy when it comes to our product portfolio. Data specifically is very unlikely to be one of those things that we’ll charge for.”
With over 250,000 artists currently connected to this platform, the time for its monetization is now. Spotify’s sights are set on indie artists, who are seen as up-and-comers who will use their tools and platform to launch careers. In wading through the details, this model does seem quite similar to Soundcloud‘s platform for content creators.
But what else can be done?
When asked about e-commerce, such as ticketing and merchandising, Ek was hesitant and deflected this question. Companies like Apple Music and Amazon’s Alexa have taken over similar markets due to better product placement and marketing strategies. However, this did not deter Ek from his central message of charging artists for their services.
Hopefully this will help assist Spotify’s current $26 billion valuation, down from $29.5 billion in April. Spotify also must toe the profit line carefully, as they continually see resistance from fair, “artist-centered” earning platforms such as the Gareth Emery-backed Choon.
You can learn more about Spotify for Artists HERE.
