In an announcement that will have plain-thinking normal folks scratching their heads and penniless musicians punching themselves in the face, Spotify has today announced their latest financials… And it’s good news… They’ve just turned a full-year profit for the first time. Ever.
Yes, the streaming giant, famous for having a CEO who is now richer than any of the artists whose music he serves, has finally made some money.
"I’m not sure that journey is fully understood. And frankly, we probably haven’t done a very good job of explaining it," admitted Daniel Ek in his statement.
It’s a scenario that’s hard to believe, but the fact is that, for the last 18 years, Spotify has simply been finding its feet.
The battle has been in the delicate balancing act of paying record companies and rights holders for use of their music, while also paying the logistic and technical costs to deliver it, while keeping the company’s brave and genius owners and investors fed and watered, while delivering a service that was reliable and keenly priced enough to keep a steady flow of users signing up, and then staying on board.
And 2024 was the first time, since the company was founded in 2006, that they got that balance right.
Now with the tough nut of ‘will streaming ever be a viable business?’ finally cracked, it’s safe to say that Spotify is truly in the money.
In fact, with all of the hard work out of the way (getting record companies to hand over their IP and users to happily part with a direct debit each month), with 675 million monthly users and 263 million paid members, the sky is now the limit. Spotify just beat expectations for revenue, profit and user growth, news which sent their shares up 13% yesterday.
The company financial report features record net income of €883 million, operating income of €477 million, free cash flow of €877 million and a gross margin 32.2% for the fourth quarter of 2024.
And with profits for 2024 being €1.37bn ($1.42bn) compared to a loss of €446m in 2023 it’s safe to say that Spotify’s endless money tap is now officially open.
Wha?… When?… How?…
The company cites the popularity of Spotify Wrapped – with artists and users sharing what they’ve been listening to (more often than not it’s themselves…) – as a key booster for the period.
And with all that great music on board and paying punters lapping it up, it’s no surprise to find that their ad revenue was through the roof too. Last year ads brought in €2 billion up nearly four times from 2018.
It’s round about now that you’re probably shouting “give artists more money” at the screen. And don’t you worry. CEO Daniel Ek knows he’s got a price to pay… but all in good time…
"If we grow, the music industry benefits," says Ek in the report pointing out that Spotify paid out a record $10 billion to the music industry last year, a figure that’s considerably up from around $1 billion a decade ago.
He also highlighted Spotify’s new multiyear deal with Universal Music Group, a deal which will see the two firms working on new subscription tiers, adding podcast and audiobook collections and paying artists even less money.
In fact, with Spotify’s war against music now effectively won, it’s this new bundling and ‘non-music’ content that’s becoming the focus for their next payday and the closer ties with UMG only put more content within their reach.
"With the world’s top talent and hundreds of millions of engaged listeners, this gives Spotify the ability to attract the best brands and product partners," teases Ek.
"And we will keep on evolving and keep on adding more verticals over time and expanding our business models to allow for more types of content and let artists and creators monetize them.
"This is the Spotify Machine."
For now, therefore, it seems unlikely that musicians will be getting any more money. And perhaps artists in every entertainment medium had best start watching those pennies.
