Spotify is one of the largest streaming music playback companies that exist throughout the world. This is a company that bills millions of dollars worldwide thanks to its activities. The Spotify concept is a concept that attracts my attention, since it is really a concept in which everyone wins, be it the page, be it the users or be it the artists. The concept consists of the reproduction of free streaming music (or payment depending on the plan) of music by internationally known artists.
Unlike piracy, Spotify is totally legal and gives money to everyone. Users get to find high-quality music for free (or at a very good price if they hire a premium plan), singers get money thanks to the money that Spotify gives them for copyrights and Spotify gets money too. The result is a multi-million dollar business that has more and more users every day. Many call it the YouTube of music and it has managed to position itself better than other companies.
If you visit the doncomos technology section, you will be able to see articles on this platform, in which we teach you how to create your Spotify account, play music, create playlists… Visit those articles if you are interested in this topic. But today we’re not here to talk about that, we’re here to try to understand how Spotify can make so much money in a business where most of the users don’t pay. How can it also distribute a large part of its profits among the singers and still be one of the companies that bill the most.
Today we will explain the secret of their success, we will see all the sources of income they have and we will see how they diversify all their financial assets.
Instructions to earn money Spotify
Capital injections
When a great company starts, it cannot be set up if there is not a great capitalist partner putting money. Although now Spotify is not a company that needs capital and that it is a fully solvent company, in its day it was not like that. We all have their beginnings and this company obtained financing by selling part of its shares to other companies, in exchange for later participating in the distribution of benefits.
Right now the people who didn’t invest here must be pulling their hair out and regretting not having bought shares or not having bought more, since those who did more than recovered their investment, since as soon as it became a bit famous the page, the visits and the money began to multiply.
Ads
This is one of the main sources of money that spotify has, in which it manages to amortize all free accounts. An ad is an advertisement from a third-party company, which pays Spotify to advertise for it. Here too everyone wins, since spotify earns money, users can use the service for free and companies earn money because they increase their clientele by advertising on a site with millions of audiences. Spotify puts two types of ads, which can only be removed if you sign up for a premium account, which I’ll talk about later.
Radio ads:
Radio ads are those ads that play between songs. In these ads you can hear everything, from common radio ads from various brands, to ads from spotify itself reminding you that if the ads bother you, you can buy the premium subscription. Many times, these ads are accompanied by a video, like a TV ad, if you are watching spotify on a device and you have the application maximized. Normally they show you a couple of ads and then let you listen to music for half an hour without interruptions, that is, they are not intrusive or very annoying ads.
Banners:
Banners are visual advertisements that are placed on web pages. For example, the big square that is above our articles is an adsense banner, which brings us benefits to be able to offer you the content for free. In the case of spotify, something similar happens, since they earn money from the banners they place on their website. They are not really banners that attract much attention, they are not intrusive and they are perfect for being able to continue listening to music without being bothered. Spotify makes more money from radio ads than banner ads, but they still make quite a bit of money from banner ads.
Premium subscriptions
Another of the main ways to earn money from this website is its premium subscriptions. A premium subscription allows you to remove ads and app limitations, you just have to pay a small fee per month instead. Although the quota is not very large, since there are millions of users, Spotify can afford it, making this an almost perfect business. This system is ideal for people who do not like ads at all, because even if they are not very intrusive, there are many people who are bothered by them. To justify the purchase, they also add additional features, such as being able to download the music for free offline listening. On some occasions, there are promotions in which we have the premium for very little money or even free for a short period of time.
Investments
Spotify knows its origins very well, therefore it also knows that other companies in the sector need help and therefore invests part of its capital in helping those companies to succeed. The way to do it is to buy part of the shares of the company from the owner, in this way, the company receives capital to start the projects. Spotify in return, can participate in the benefits. When the fiscal year ends, dividends are distributed according to what they have earned and according to the percentage of participation they have purchased. They can also absorb an entire company, in which they buy the majority of its shares and can command it. This is widely used to absorb competing companies, thus achieving a monopoly that makes them much more money both in the short and long term.
Agreements with record companies
As it is difficult to negotiate with individual artists, Spotify obtains luscious agreements with certain renowned record companies, such as Universal. In these deals, Spotify gets the rights to the songs for very little money, making their system much more profitable than if they negotiated with the artists separately. In these deals, the record labels also make money, since by letting their music be played in this venue, it will increase the popularity of the label’s artists. In this way, then there will be more people who buy the records, more people who go to the concerts and more people who spend money on marketing that artist in question. Users will also enjoy this, since as we have already seen, they will be able to enjoy quite good subscription prices, without having to spend their pockets on expensive artist CDs and without having to resort to piracy to be able to listen to your favorite music for free.
