Sweden-based music streaming giant Spotify buys two podcast startups, aims to become ‘Netflix of audio’!

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Spotify, originally a Swedish commercial music streaming startup has announced the financial results for the fourth quarter of 2018 posting an operating profit for the first time.

According to the 10-year old company, the Operating Income, Net Income, and Free Cash Flow were all positive for the first time in company history. During Q4, Spotify expanded its presence across 13 countries in the Middle East and North Africa in mid-November adding up to 78 countries.

96 million premium subscribers!

In addition to it, Spotify has also reached a milestone of users consuming more than 15 billion hours of content on the platform. It’s worth mentioning here that engagement grew across both the Ad-Supported and Premium tiers. Premium Subscribers reached 96 million, up 36% Y/Y.

Total Q4 revenue was €1,495 million, out of which €1,320 million or 88% of revenue came from Premium subscribers. As per Spotify, average revenue per user was €4.89. Furthermore, Ad-Supported revenue accounted for just €175 million of its total turnover.

Revenue from North America continued to accelerate, growing 41% Y/Y (37% excluding movements in F/X). Both Audio and Video format ads grew more than 40% in Q4. Right now, more than 300,000 creators and their teams use Spotify’s Artist platform on a monthly basis.

Spotify for Podcasters

The music streaming service also want to be a big podcast company. As a result, the company has acquired Gimlet Media, a podcast producer and network, for $230 million and Anchor, a startup that makes it simpler for people to record and distribute their own podcasts.

On the other hand, the company launched Spotify for Podcasters, a platform where podcast creators who host their podcasts elsewhere can make their shows available to Spotify users by providing their podcast feed. As per Spotify claims, more than 10,000 podcasters are using this tool on a monthly basis to gain deeper insight into their audience. Today, there are more than 185,000 podcast titles available on the platform.

All said and done, Stockholm-based Spotify said it predicts a loss of somewhere between $228 million and $410 million this 2019.

‘Netflix of audio’

A decade ago, Spotify was born to give consumers something they couldn’t get — music any time, anywhere, and at a reasonable price. At this point, the music industry is dominated by a small number of companies and Spotify is one of them!

Just like Netflix, Spotify is trying to double down the content creation business. In fact, this sudden obsession with the podcast is due to the fact that it can help find new users, keep the existing ones, make more money, and increase its profit margins since it’s cheaper to make than songs from big labels and hit artists.

When it comes to Spotify’s business model, the bigger it gets, the more it has to pay for its music. This model makes its road to profit bit difficult.

It would be interesting to see how Spotify manages things in the upcoming days! Do let us know your opinion in the comments below.

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