Extended-form Case Study

Spotify: profitability in music streaming services

Published on June 29, 2022   10 min

A selection of talks on Technology & Operations

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0:00
Hello. My name is Mariusz Soltanifar. I am a researcher in the area of Corporate Entrepreneurship and Marketing Lecturer at the Hanze International Business School in Groningen, the Netherlands. Today, I'm going to talk about music streaming services and how royalties paid out to artists are prohibiting Spotify from turning a profit. Using Spotify as an example, we are going to analyze how Spotify can increase revenues from royalties, while keeping artists at the platform as well as being able to turn a profit.
0:35
Let's first have a look at the overview of what I've prepared. The following case focuses on Spotify and how music streaming services pay out royalties to artists, as well as how Spotify can turn a profit but also keep artists on their platform. First, the nature of the challenge is highlighted. Second, the company itself is presented. Third, the explanation of what has been done, the action taken, is discussed. Fourth, the outcome is revealed. Lastly, the learning is presented.
1:10
Let me highlight the nature of the challenge that Spotify faces first. Spotify is the world's largest music streaming platform. However, it has struggled to attain profitability. In 2018, Spotify managed to have earnings, before interest, taxes, depreciation and amortisation, of more than minus $300 million. This is an increase in losses compared to previous years. This shows how, over the last few years, the company has struggled to attain profitability, mainly due to the extensive cost of music licensing. The royalties that Spotify has to pay to musicians and artists account for 75% of its expenses. Moreover, these agreements that are in place with artists are not without issues. For instance, multiple artists have expressed that they feel they are not being compensated enough for their intellectual property.

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Spotify: profitability in music streaming services

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