When it comes to music streaming Spotify leads the pack: 50% of free users purchase subscriptions
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When it comes to music streaming Spotify leads the pack: 50% of free users purchase subscriptions

Speaking at the 27th annual Goldman Sachs Communacopia conference earlier this month, music streaming service Spotify’s chief financial officer made a claim that will be leaving its rivals green with envy: 50% of free users that try the platform out buy a subscription. Barry McCarthy, who previously performed the same role at Netflix, thinks the company can continue to grow subscriptions in exactly the same way “if we make the free service better.”

Spotify’s share price has appreciated by 16% year to date

graph 2109 spotify

SOURCE: Yahoo Finance

McCarthy was eager to share interesting information from the world of music streaming. Of the 2 million artists on Spotify’s platform, 10% of them accounted for 72% of all the streams music fans listened to, while the remaining 90% was left fighting over 28% of listeners’ attention. It doesn’t take a genius to see how such a realisation could help to shape Spotify’s strategy going forward.

McCarthy also had news for the industry’s other players: for “relatively small and undercapitalised streamers, it’s game over, eve if they have not figured it out.” The reason McCarthy sees size as important in the streaming world is simple: “the service with the best music discovery wins.” Music discovery refers to song suggestions, and ways in which platforms can show new music to their listeners. The bigger the company, the more data it has to work with. In this way, McCarthy added “like Netflix, Spotify is a software first company.”

graph 2109 spotfy2

If McCarthy’s right about size mattering, then he’s also right that Spotify is in a great position. According to the latest figures, Spotify is a dominant force worldwide when it comes to music subscriptions, holding a massive 36% of the market. Even massive competitors like Apple Music, Amazon Music, and Pandora don’t even come close.

Another thing that stands out from the music industry’s first half of 2018 is that it is continuing to see strong growth. So far, streaming revenues have risen (significantly) for ten straight quarters. That’s a great market in which to be the leader.


Dominion holds Spotify in its Global Trends Luxury Fund

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