Spotify has reached a new subscriber milestone - and there's no sign of slowing down

Apple Music Vs Spotify BI Intelligence

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Spotify now has 60 million paying subscribers, up from 50 million in March. The music streaming platform had over 140 million active users as of June, implying it has an approximate 40% conversion rate to paying subscribers.

Its closest competitor, Apple Music, has roughly 27 million subscribers. Spotify seems to be positioned well to continue its growth for the following reasons:

It’s taken steps to lower royalty payouts with major record labels. Royalties are a big expense for Spotify, consuming nearly 85% of its revenue. However, it’s recently lowered its royalty rate paid to Universal Music Group by five percentage points, and reached an agreement with Sony Music that is likely similar in revenue split terms. And its finalizing a licensing deal with Warner Music to gain a more favorable revenue split. Having lower royalty rates ultimately frees up more money for the company to operate and invest in building out its platform.
Music streaming revenue is projected to rise. Streaming revenues are projected to rise 37% to $9.1 billion in 2017, eclipsing physical formats that are expected to drop 10% to $7.7 billion. This implies Spotify will continue to grow its revenue, and potentially its listener base too. However, Spotify will still have to work to convert users into paying subscribers.
And accelerating subscriber growth could continue to entice more artists to Spotify. The subscription model produces a great amount of revenue for artists and record labels, according to A2IM CEO Richard James Burgess. If subscribers continue to grow, more artists could come to the platform, which could ultimately continue to draw in more users, creating a viable supply and demand ecosystem.
Its stake in the smart speaker market could help position it to succeed. Spotify is one of the leading music streaming services for Google Home, according to TechCrunch. The US smart home speaker market is expected to grow at a compound annual growth rate (CAGR) of 38% from 2017-2021, according to Technavio. Though Amazon’s Echo leads the smart speaker market, Spotify’s hold with Google Home could help ensure the company is not left behind as more users turn to smart speakers to stream music, in addition to other mediums such as their phones. This is especially important as Apple’s HomePod smart speaker will only play Apple Music.
It’s managed to increase its user growth rate as its subscriber base grew. The music streaming service added 10 million subscriber additions in roughly four months, faster than the approximate six months it took to go from 40 million subscribers to 50 million. And some estimate Spotify could reach 70 million subscribers by the end of 2017. Apple Music, on the other hand, took roughly six months to go from 20 million to 27 million subscribers.