Spotify held its first ‘Investor Day’ presentation since 2018 in New York in the present day.
There was loads of optimism on show through the occasion’s near-four hours of company chatter, which we’ll be breaking into bite-size chunks within the days and weeks forward.
(Apologies prematurely if issues get particularly Spotify Enterprise Worldwide spherical these components because of this. However SPOT is the largest music subscription firm on the planet, so, y’know, truthful’s truthful.)
In his opening remarks in the present day, Spotify co-founder and CEO, Daniel Ek, mentioned Spotify’s anticipated growth into audiobooks, earlier than teasing a standout presentation from Spotify’s Chief Freemium Enterprise Officer, Alex Norström.
Norström, promised Ek, was about to “stroll you thru how we plan to get to a billion customers” over the following eight years.
Some time later, Norström took the stage, and wasted no time in making this declare.
Hitting a billion customers by 2030 for Spotify could be no imply feat.
That stated, Spotify ended 2021 with 406 million month-to-month lively customers (MAUs) globally, up 61 million YoY.
If SPOT might one way or the other keep that tempo of progress over the next decade (+61m per yr), its platform would hit 1 billion MAUs within the second half of 2030.
One in every of Spotify’s methods to succeed in the 1 billion MAU threshold, stated Norström, was its continuous progress in ‘established’ (i.e. mature) streaming markets (North America, UK & Western Europe, Australia & New Zealand).
However maybe crucial a part of the plan, Norström indicated, was the potential for Spotify’s accelerated progress throughout ’rising’ markets – which, for the sake of his presentation, he named as Africa, Asia, Latin America (LatAm) and the Center East.
Norström then defined why these ’rising’ markets supply such promise for Spotify, a product now accessible in 183 markets globally.
In line with information proven in Norström’s presentation, there are at present 600 million smartphone customers throughout the aforementioned ‘established’ markets (in areas that even have entry to Spotify).
Spotify subsequently considers these 600 million smartphone customers as its Whole Addressable Market (TAM) in these areas. And with 184 million SPOT customers in these ‘established markets’ on the shut of 2021, Norström calculated, Spotify already counts 32% of them as clients.
But within the ’rising’ markets, Norström defined, the potential TAM for Spotify – and subsequently the potential consumer progress alternative for Spotify – is far bigger.
Spotify’s TAM within the ’rising markets’ (reminder: Africa, Asia, LatAm, and the Center East), stated Norström, is at present 2.7 billion smartphone customers.
He added that Spotify at present reaches simply 8% of this ’rising market’ TAM, i.e. round 216 million customers.
That leaves 92% of this 2.7 billion TAM viewers for Spotify to go get.
Investor appetites whetted, Norström turned his consideration, particularly, to Latin America, and Spotify’s progress story available in the market up to now.
He unveiled the beneath graph, showcasing Spotify’s Month-to-month Lively Consumer (MAU) and subscriber progress throughout Latin America over the previous 5 years.
At this level, MBW’s antennae dinged: this was model new data.
Spotify breaks down its MAU attain by international area for buyers every quarter, however solely by way of rounded percentages, from which precise user-counts can’t be derived.
Norström’s LatAm figures, although, had been good and exact – and got here full with an up-ticking bar chart (see beneath).
Spotify is clearly very proud of its LatAm story: Norström select to function it prominently in his presentation, whereas commenting of Spotify’s efficiency in Latin America:
“We’re near having 100 million customers within the area. MAU over TAM [i.e. how many users Spotify has vs. smartphone users in LatAm] is 20%, and the engagement is unbelievable… our subscriber proposition has began to achieve critical traction, and with a 60% subscriber market share, we’ve a robust lead [on the competition].”
However, naturally, when MBW sees a chart like this, we need to dig deeper. So we did.
Under, you may see what Norström’s chart seems to be like repurposed to incorporate YoY progress numbers for Spotify by way of each LatAm MAUs and LatAm subscribers (in hundreds of thousands).
Right here’s what it tells us: Spotify’s YoY MAU progress in Latin America, in accordance with its official figures, really fell significantly in 2021.
The prior yr, in 2020, Spotify grew by 16 million LatAm MAUs; in 2019, it was 15 million MAUs.
But in 2021, that quantity tumbled to +11 million.
SPOT’s fall in LatAm subscriber progress was smaller, right down to +5 million YoY – however in every of the prior three years, this determine stood at +6 million.
These are under no circumstances horrendous figures for Spotify, however they’re shocking to see. Particularly with regard to LatAm – a music market which is rising like by no means earlier than.
In line with IFPI information quoted by Sony Music in a presentation final week, the LatAm area grew by 31.2% YoY in 2021 (by way of recorded music commerce revenues) topping USD $1.0 billion for the primary time in historical past.
And in accordance with IFPI’s International Music Report this 31.2% progress in Latin America sped up the area’s fortunes versus the prior two years: LatAm was up 18.1% in 2020, says IFPI, and up 23.2% in 2019.
So the deceleration in Spotify’s consumer progress in LatAm doesn’t match the income development of the area from a music perspective.
It ought to be stated that Spotify’s subscription worth rises in areas like Argentina and Brazil final yr – each confirmed on the Investor Day presentation in the present day – performed a big position in driving LatAm’s document income progress final yr.
Nonetheless, if Spotify’s investor narrative is one in every of accelerated consumer progress in ’rising’ markets, then why is its consumer progress slowing down in one of the vital vital ’rising’ markets of all?
Having coated LatAm, Alex Norström’s presentation turned to India, the place he claimed that Spotify has “raced previous all competitors” prior to now two years as a music streaming supplier.
Norström provided stats exhibiting that in 2021, Spotify claimed 35% of whole month-to-month streaming quantity amongst India’s high 5 music streaming platforms.
This was sufficient, stated Norström’, to go away Spotify as “the clear No.1 music streaming service in India, judging by engagement”.
Nevertheless, Norström stopped quick at telling us what Spotify’s market place in India is by way of precise variety of customers/subscribers versus the likes of JioSaavn, Gaana and many others.
An hour or so after Norström’s presentation, concluding the day’s occasions earlier than an investor Q&A, Daniel Ek stood in entrance of a Spotify-branded display bearing the phrases, “Alternative is very large.”
“From every part I see,” stated Ek, “I imagine that over the following decade [Spotify] shall be an organization that may generate $100 billion in income yearly. And that we will obtain a 40% gross margin, and a 20% working margin.”
These are clearly very bold targets. As, certainly, is that projected milestone of 1 billion MAUs globally by 2030.
Can Spotify get there whilst its progress in Latin America decelerates?
Latin America: a $1 billion-plus ’rising’ market, with explosive progress behind it – and, crucially, with explosive progress nonetheless forward of it?
Questions, maybe, for Spotify’s subsequent Investor Day, each time that may be.Music Enterprise Worldwide
