The likes of Apple and Amazon have firmly established themselves as Spotify competitors. How will the music giant defend its spot at the top?
Spotify (NYSE: SPOT) was founded in 2006, in Stockholm, Sweden by current CEO Daniel Ek and Martin Lorentzon; launching in October 2008. The company has had phenomenal revenue growth from $2.2 billion in 2015 to $7.44 billion in 2019, an increase of nearly 240%. Its global subscriber number skyrocketed from 18 million to 124 million (588% increase) in the same time period. With these kinds of numbers, competitors to Spotify were not hard to find.
Fortunately for the Swedish streaming giant, its subscriber base is significantly higher than Apple (NASDAQ: AAPL) Music’s total of 60 million or Amazon (NASDAQ: AMZN) Music’s 55 million subscribers. The icing on the cake is that the music streaming industry’s future looks very bright with its revenue forecasted to grow to $15.5 billion by 2024 from its current $11.5 billion; and Spotify is in an ideal position to benefit as it is the leader in the sector with a 36% market share.
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The company has seen some bumps in the road, however, related to licensing and artist payments. Spotify came under fire recently for appealing a 44% raise in songwriter royalty rates made by the U.S. Copyright Royalty Board in January 2018. Additionally in 2018, the company settled a $1.6 billion lawsuit filed by Wixen Music Publishing relating to missing mechanical licenses for the company’s content. Spotify has also faced strong criticism from artists in relation to their compensation. Using a pro-rata system rather than a user-centric one, independent artists make significantly less than popular ones on the platform.
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These setbacks aside, Spotify’s competitors have also been growing in their quest to eat into its market share, from behemoths like Apple and Amazon to a dark horse entrant in the industry.
Apple launched its music streaming service on June 30, 2015. With a catalog of 50 million songs, the trillion-dollar behemoth is an obvious competitive threat to Spotify. Apple Music’s global subscription rate has grown nearly tenfold to 60 million in 2019 since its inception. In April of 2019, the company’s U.S. subscription number of 28 million beat that of Spotify’s by 2 million.
An advantage that Apple has over Spotify is its seamless integration with Siri, Apple’s digital assistant, and its ability to mix personal music files with streaming ones. Unlike Spotify, however, Apple does not offer a free ad-supported tier and this is where Spotify leaves the competition in the dust with 248 million combined users worldwide.
Amazon, the nearly trillion-dollar e-commerce giant, revealed earlier this year that its music streaming service, Amazon Music Unlimited, has 55 million subscribers. Launched in 2016, the company introduced its free ad-supported tier in 2019. Amazon Music Unlimited is available at a discount for Amazon Prime members (156 million worldwide). This is certainly an incentive for existing members to sign up over the other services.
Another advantage it offers is with its flawless integration with Alexa and Echo, Amazon’s proprietary assistant devices, which had a 28.3% smart speaker market share in Q4 of 2019. In fact, Amazon offers a $4-per-month subscription for an Echo plan, limited to streaming only on one device. Of the top streaming services, Amazon has seen the most rapid growth in subscription numbers, surging approximately 70% from 2018 to 2019. Spotify only grew its numbers 25% in the same period.
Chinese company ByteDance is privately held and valued at roughly $78 billion. It owns the TikTok app, which has about 500 million active users globally. Its music streaming service, Resso, was launched in India, Indonesia, and Brazil late last year, with the U.S. launch forthcoming.
This streaming service differentiates itself from the competition by focusing more on the social aspects of the music-listening experience like syncing short video clips to songs, sharing playlists, and commenting on individual tracks. Additionally, the service offers real-time lyrics for its catalog of songs.
Although it isn’t as big as Apple or Amazon, ByteDance completely dominates the app market (making it to the top 10 downloaded apps in the last decade even though it entered the market in 2016). Since January 1, 2014, TikTok has been downloaded 1.52 billion times compared to Spotify’s 864.3 million. With TikTok’s massive membership count, ByteDance can market Resso to its massive hoard of existing members.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.