SPOTIFY'S PODCAST POWER PLAY
Bloomberg Businessweek|January 18, 2021
The company is staking its future on converting music listeners to podcast fans and has become the favorite to own the industry—for better or worse
Lucas Shaw
SPOTIFY'S PODCAST POWER PLAY

When Spotify went public in April 2018, Daniel Ek had been struggling with this question for more than a decade: How would the company make money? The Swedish entrepreneur had saved the music business from 15 years of declining sales with an app that can stream millions of songs on demand. But in exchange for that bottomless buffet, he agreed to return more than 70% of every dollar Spotify earned to rights holders. So despite building the most popular paid music service in the world —it would take in $6.1 billion in sales in 2018—Spotify Technology SA hadn’t turned a profit since Ek co-founded it in 2006. Wall Street is obviously capable of forgiving years of a company’s losses (see Amazon, Netflix, Tesla, etc.). But investors have never made sense of Spotify’s business model. For every $5 that comes in, about $3.75 goes right back out.

Ek had long argued that the answer would come from changing how the music business operated. Three record label groups control the majority of new music releases, giving them power over Spotify in negotiations. But Ek thought streaming would begin an era when artists didn’t need labels. Musicians could use social media to promote their work and Spotify to distribute it. “The old model favored certain gatekeepers,” he wrote in a letter to prospective investors in February 2018. “Today, artists can produce and release their own music.”

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