Big labels in the music industry have discovered a hack that is mutually beneficial to them and the shareholders of Spotify. It’s simple: without music (which these labels produce), Spotify becomes redundant, and the labels need Spotify to promote their artists. Although Spotify isn’t the only streaming service, it is popular for its unique “influencer playlists,” which can significantly boost music promotion. Labels have discovered a way to harness this co-dependency by co-operating with one another.
High Recognition From Labels
For successful music promotions, industry giants have discovered Spotify is important. Spotify benefits from the arrangement through the advertising it gains from reputable labels. CDs have begun to generate less revenue because of mobile devices and more digital methods of providing music.
The fact that Spotify can give the labels billions of streams from their users, makes them a more feasible option to generate profit. In 2022, Sony Entertainment featured Spotify in its Business Segment Briefings. Sony’s share increase of 33% is proof of its strategy. Other popular streaming services were not included.
Although Sony is the biggest music conglomerate in the industry, two other giants contend with it: Universal and Warner.
Universal also values Spotify as an asset for music promotion judging by how they are mentioned first in the company’s prospectus. This is considering their partnership with Apple Music, YouTube, etc. Particular artists from both companies are recognized for their successful music promotions on Spotify, such as JuiceWRLD, Drake, Lil Nas x, Harry Styles, etc.
The importance of Spotify began to dawn on them in 2021 when Warner Music Group’s Anitta’s song rose to the top of the daily charts. However, their partnership with other streaming services does not seem as active as with Spotify, which has generated up to 18% of revenue in just 2021. Warner Bros., on the other hand, is still developing its relationship with Spotify.
While Spotify has leveraged these platforms to promote artists, the company has been unable to mitigate losses while providing significant profit for these benefactors. So, a new arrangement has begun to play.
Spotify has created direct contracts with artists who have yet to sign with the big labels. These upcoming artists get to promote their music freely, and Spotify earns profit from the arrangement, all without the involvement of a third party.
Valuation
According to a press release by 1Q22, Spotify has had continuous user appreciation with 18 million users from both ad support and premium subscriptions. Spotify has critical differences from other streaming services such as Netflix, with its free service and the fact that they do not produce for artistes. Their CEO listed the differences clearly during the 1Q22 press release.
There has been a gradual increase in gross profit from 1.7 million euros to over 2 million euros between 2019 and 2021.
According to statistics from their 1Q22 press release, Spotify is projected to increase profits above its margin by up to 10%. With their revenues, Spotify should be valued at around 27 billion euros. With the company’s sporadic growth rates and evolution, there should be a future increase.
Media Contact
Organization: ARTISTPUSH
Contact Person: Media relations
Website: https://artistpush.me/collections/spotify-promotion
Email: Send Email
Country: Estonia
Release Id: 24052412483