Back in 2008, a dozen people gathered in a tiny office in Stockholm, Sweden, and built something that would first shatter, then save, and ultimately rebuild music.
A decade later, Spotify is ready to come into its own. The music-streaming company makes its market debut on Tuesday (April 3). It is taking a risk by going public via a direct listing rather than a traditional IPO; Spotify’s operating losses also mean the company has not yet been able to turn a profit, putting investors in a very wary mood.
But the company has had 10 years of experience breaking the mold. Spotify is a no longer just a music-streaming service, either. It is a record label, a discovery platform, a hit-making machine, an impassioned community. Below is an overview in simple charts of how it came to dominate the music industry—and how it could do even more in the future.
By offering a musical buffet featuring some 35,000 songs for a fixed price—at a regular monthly rate of $9.99, but often even cheaper than that with discounts and promotional pricing—Spotify made music wildly more accessible for listeners. And because it boasts 159 million users, far more than any other music-streaming service, it has come to wield significant influence in music’s charts and revenue.
There are qualms yet about the company’s business strategy. Spotify’s founder Daniel Ek champions the idea of letting people listen to music for free—so the service has two tiers, free and paid, in a model known as “freemium.” The free tier, supported by advertisements, makes much less money than the subscription tier. Everyone from Taylor Swift to Apple Music has railed against it.
But Spotify CFO Barry McCarthy insists that the bulk of Spotify users in the future will naturally gravitate from free to paid—though, at the present moment, there are more people listening for free than via subscription, and it’s dragging down the company’s finances.
Thanks to the advent of music streaming, the music industry is finally seeing an uptick from 20 years of slipping sales.
In 1999—the industry’s peak—physical CDs and vinyl LPs were flying off shelves, generating annual revenue of $14.5 billion. Then came digitization, with downloads, which had cheaper price tags than physical records, and rampant online piracy, which took a painful bite out of the business’s profits.
But streaming is now bringing everything back up, albeit slowly. The music industry remains far from its heyday, but analysts and industry experts agree that without Spotify, or some kind of similarly reinvigorated business model, there would likely have never been a resurgence.
A decade after disrupting music, Spotify no longer stands alone in the space. Apple Music, backed by the power of a deep-pocketed tech giant, is gaining on Spotify in both features and subscribers. Google’s YouTube is gearing up to launch a music-centric service.
Spotify’s market debut this week could be a boon to its expansion, leading it to roll out more features, snag new users, and eventually sprawl out into the entire entertainment industry. (It’s already working on original video content and podcasts.) But that’s assuming that investors—who are looking at a less-than-stable company at the center of a precarious industry that’s barely on the upswing—are going to be more thrilled than spooked.
Adam Pasick contributed reporting.