Photo by John Parra
Getty Images for Spotify
Spotify, the leading music streaming platform by worldwide subscribers announced its Q2 2019 earnings and relevant growth data during a call with investors and other interested parties on Wednesday morning.
Spotify now has 232 million active users worldwide with 108 million of those users paying for the premium service across Europe (40 percent), North America (30 percent), Latin America (20 percent) and the Rest Of World (10 percent).
While projected paid subscriber growth did not meet some analyst expectations, markers for success revealed themselves in other forms and may continue to surprise throughout the balance of the fiscal year and into 2020. “There are a number of levers we can pull when it comes to growth,” said CFA Paul Vogel identifying three areas to move the needle; investment in product capabilities, improving content portfolio and range of content, and pricing.
Building on key learnings in music, Spotify put a stake in the ground earlier this year to target niche communities more precisely. Expanding into podcasting with strategic acquisitions of Gimlet Media, Anchor, and Parcast, Spotify has formed the structural foundation necessary to support a sustainable podcasting ecosystem. With an intension to invest nearly $500 million into its podcasting initiative, Spotify continues to execute.
This strategy seems to have paid off as podcasting audiences grew more than 50 percent Q/Q and have nearly doubled since the beginning of the year. More than 30,000 new podcasts were delivered through the platform, product features like Your Daily Drive – a personalized music-news hybrid playlist targeting commuters with media partners NPR, The Wall Street Journal, and The New York Times launched along with the Disney Hub – a family-centric, nostalgia-driven home for Disney music.
Exclusive content deals with political-facing talent ahead of the 2020 election were announced – Michelle and Barak Obama’s Higher Ground production company and Jemele Hill’s Unbothered are now part of the Spotify family. Now that there is so much content, how will it be organized or curated? A hurdle the podcasting world is now facing is one of curation – a pain point Spotify has plans to tackle using AI, “we are actively developing better machine learning models as it relates to podcasting,” said CEO Daniel Ek.
While many equate Spotify to music, the foundation of the business is technology. The concepts of “experimentation” and “iteration” – both central to product development of a tech company were repeatedly mentioned on the investor call pointing to Spotify’s roots. “We’re actively prototyping new products with our partners,” said CFA Paul Vogel with respect to experimentation and in response to a question on why the Upload Beta Program was cancelled.
A company value of experimentation could seem like an unclear path to a destination that may not even exist – quite the opposite of a music company where experimenting barely exists and risk is calculated based purely on facts and figures.
For some investors, iterating or launching in beta may seem like a waste of time from the outset, however proving out product market fit with consumers and artists alike could potentially harness the stickiness needed to attract more users and build stronger relationships with existing ones.