Spotify Is Still Sprinting for Maximum Market Share: Analysis

. Video streaming appears to be a better parallel, though. Netflix, still the market leader, has ceded share to its followers, Hulu, Amazon Prime and HBO Now. Then last year, Apple launched its TV service, Apple TV+, while NBCUniversal preps its entrant, Peacock, and AT&T WarnerMedia readies HBO Max. The difference is overlap: most consumers will subscribe to multiple video services but just one music service.

In 2018, when Spotify filed with the SEC for a public stock sale, the S-1 filing revealed its long-term vision: “Music has just been the beginning. We’re an audio first platform,’" Ek said in a note to investors. Spotify has dabbled in video, but Ek’s statement revealed the importance of another audio format -- the podcast.

Podcasting is the next front in the battle for subscribers, listeners and ad dollars. Here, Spotify competes against podcast networks, broadcast radio and Apple for a global podcast ad market growing 26% each year to about $2.6 billion by 2024, according to. That’s good money for companies that own podcasts like Spotify and iHeartMedia, rather than those that simply stream them like Deezer and Amazon.

Podcasts can also give margin relief to music services that owe about 70% of subscription revenue to music rights holders. Spotify’s advertising, necessary for the free service that drives subscriber acquisition, was $745 million in 2019, just 10% of total revenue. But podcasts won’t pay royalties to music rights holders. Instead, Spotify sells ads for its original podcasts. To that end, on Jan. 7 Spotify unveiled new technology to improve how ads are bought and inserted into podcasts.

But growth isn’t cheap. Each year, Spotify has spent more in sales and marketing for each new subscriber, from $20 in 2016 to $32.40 in 2019. Podcast-related acquisitions will cost Spotify between $535 million and $608 million at current exchange rates. Ek also attributed the growth spurt to product improvements such as Daily Drive, a personalized playlist of music and podcasts meant for morning commutes.

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Spotify Is Still Sprinting for Maximum Market Share: AnalysisSpotify&39;s push into podcasting has helped the streaming company accelerate its user growth. Will other services follow?
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