Spotify

Streaming Service

Spotify is a music and audio streaming platform co-founded by Daniel Ek and Martin Lorentzon in April 2006, and launched in October 2008.

The platform operates a freemium structure, with both a paid-for subscription tier, and an ad-funded ‘free’ tier on its service.

Spotify initially launched in the UK, Germany, France, Italy, Spain, Finland, Norway and its home country of Sweden in 2008.

It then launched in the United States in July 2011, offering users a six-month trial to all music via its ‘free’, ad-supported tier.

Following that six month trial, Spotify planned to restrict ‘free’ access to its service in the US. Post-trial period, any US consumer who didn’t sign up to a paid subscription was told they would see their use of Spotify’s ad-funded tier limited to ten hours of music per month, and that they could only listen to a specific song five times in the same time period.

However, in March 2012, Spotify scrapped this restriction, meaning that ‘free’ Spotify users in the US could access the platform’s entire music library.

Following years of sustained global growth, Spotify floated on the New York Stock Exchange on April 3, 2018, via a Direct Public Offering (DPO).

The company’s ticker on the NYSE is SPOT.


How many subscribers does Spotify have worldwide today?

Spotify has regularly updated its shareholders with its global subscriber count since it launched.

Initially, these updates came via media announcements and year-end financial documents registered in Luxembourg.

Since April 2018, Spotify has updated investors on its global subscriber figures via SEC filings and quarterly investor announcements in the US.

According to an investor update posted on October 29, 2020, Spotify ended Q3 2020 (the three months to end of September) with 144 million Premium subscribers and 320 million total monthly active users (MAUs).

The Premium subscribers figure (144 million) was up 27% year-on-year and 5% quarter-on-quarter.


Spotify’s global expansion – including launches in Japan, Indonesia, the Middle East, India and elsewhere

Spotify has continued with an aggressive roadmap of global expansion for its service since landing in the United States in 2011.

  • In March 2012, Spotify confirmed it was expanding into Germany, making the European territory the 13th country to host a Spotify launch globally.
  • In February 2013, Spotify announced it was further expanding its availability in Europe to Poland, Portugal, and Italy.
  • In September 2014, Spotify increased its presence in North America by launching in Canada.
  • In February 2015, Spotify expanded again, into Turkey, via a deal with telco Vodafone.
  • In March 2016, Spotify announced its launch in Indonesia, which has a population of over 270 million people.
  • Little over 18 months later, in September 2016, Spotify announced that it had launched in Japan for the first time.
  • In August 2017, Spotify expanded into Thailand, increasing the service’s growing presence in Asia.
  • March 2018 saw a flurry of global expansion for Spotify, as it launched in South Africa, Israel, Vietnam, and Romania, taking its total global reach to 65 countries.
  • In November 2018, Spotify announced that it had expanded into the Middle East and North Africa (MENA) across a number of territories: United Arab Emirates, Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, Algeria, Morocco, Tunisia, Jordan, Lebanon, Palestinian Territories and Egypt. This move took Spotify’s total worldwide coverage to 78 separate markets.
  • In February 2019, Spotify made the long-awaited announcement that it was launching in India, a country with a population of over 1.3 billion people.
  • In July 2020, as predicted by Music Business Worldwide, Spotify launched in Russia, in addition to 12 other Eastern European territories. This move meant that the service was now live in 92 markets globally.
  • In December 2020, Spotify confirmed that it was planning to launch its service in South Korea in the first half of 2021.

Major record company shares in Spotify and subsequent sales

As a condition of Spotify’s licensing agreements with major music rightsholders, the streaming company gave equity stakes in its business to five parties: Universal Music Group, Sony BMG (which became Sony Music Entertainment), Warner Music Group, EMI Music, and Merlin.

In May 2018, Music Business Worldwide uncovered Spotify corporate filings that detailed these agreements, showing that between them, these parties shared an 18% equity stake as a result of these Spotify launch deals.

Sony BMG acquired the biggest amount, with 117,392 shares in Spotify – which amounted to 6% of the streaming company.

Universal Music Group acquired 97,827 (5%), but in 2012 UMG acquired EMI Music, which obtained a 2% stakeholding in Spotify in 2008. This retrospectively gave UMG an 8% shareholding in Spotify at launch.

Warner got given 78,261 shares – worth 4% of the Spotify business in 2008 – and Merlin took home 19,565, worth exactly 1%.

The percentage amounts of these shareholdings were all later diluted by additional Spotify investment rounds.

In April 2018, following Spotify’s flotation on the New York Stock Exchange, Merlin sold 100% of its shares for what is estimated to be proceeds of over $100 million.

In August 2018, Warner announced that it too had sold the entirety of its stakeholding in Spotify. WMG CEO Steve Cooper told the firm’s investors that Warner banked $504m in proceeds from selling 100% of its Spotify stock in the quarter ending June 2018.

Warner credited its artists with $126 million of this figure, equivalent to 25% of the total proceeds. However, that $126 million was put against existing unrecouped artist balances on advances, meaning much of it would have stayed with Warner.

In July 2018, Sony Corp confirmed that 50% of Sony Music’s shares in Spotify were sold in the second calendar quarter of that year for “an aggregate consideration of 82.616bn Yen (USD $768 million) in cash”.

Ahead of Spotify’s flotation in April 2018, Sony Music ended up with a 5.7% equity stake in the streaming company, suggesting it had acquired additional shares in Spotify subsequent to acquiring an initial tranche via that licensing agreement in 2008.

Unlike Warner Music Group, Sony Music overlooked unrecouped balances when paying artists their share of these proceeds. In January 2021, during a UK Parliamentary  inquiry into Streaming Economics, Sony Music UK CEO & Chairman, Jason Iley, confirmed that, of its $768 million in 2018 Spotify proceeds, Sony Music paid over $250 million “directly into the pockets of artists”.

As of January 2021, Sony Music continues to own 50% of its pre-flotation Spotify shares. Universal Music Group continues to own 100% of its stakeholding.Music Business Worldwide

Spotify In The News

1 2 313