Spotify Technology SA is a media-services provider founded in 2006 in Sweden by Daniel Ek and Martin Lorentzon. Spotify's primary business is its audio streaming platform that provides digital rights management-protected music and podcasts from record labels and media companies. Spotify has been on a recent acquisition streak, acquiring Gimlet Media Inc and Anchor FM Inc in February 2019, and Bill Simmons Media Group LLC (The Ringer) in February 2020, in order to bolster the company's podcast offerings. Operating as a freemium service, basic Spotify features are free with advertisements or automatic music videos, while additional features, such as improved streaming quality, are offered via paid subscriptions.
Unlike physical or download sales, which pay artists a fixed price per song or album sold, Spotify pays royalties based on the number of artists streams as a proportion of total songs streamed. It distributes approximately 70% of total revenue to rights holders, who then pay artists based on their individual agreements.
In the year ending 31 December 2019, Spotify had 124 million premium subscribers, 153 million ad-supported monthly active users, and a total of 271 million monthly active users world wide.
Spotify Technology SA is incorporated in Luxembourg and is traded on the New York Stock Exchange (NYSE) under the code SPOT.
Premium Service - Spotify's premium service provides premium subscribers with unlimited online and offline streaming access to the company's catalog. In addition to accessing Spotify's catalog on computers, tablets, and mobile devices, users can connect through speakers, receivers, televisions, cars, game consoles, and smart watches. The premium service is also commercial-free (or ad-free) and enables users to download songs and create their own playlists. Premium services are sold directly to end users and through partners who are generally telecommunications companies that bundle the subscription with their own services or collect payment for the stand-alone subscriptions from end customers. Spotify offers a variety of subscription pricing plans for the company's premium Service, including a standard plan, a family plan, and a student plan. These different plans are adapted to each local market to align with consumer purchasing power, general cost levels, and willingness to pay for a music service. For the year ending 31 December 2019, Spotify's premium service accounted for 89.69% (EUR 6,086.0 million) of total revenue.
Ad-Supported Service - Spotify's ad-supported service has no subscription fees and provides ad-supported users with limited on-demand online access to the Spotify catalog. Essentially, you can listen to music, but you just have to listen to an ad before you do. Spotify generates revenue for its ad-supported segment from the sale of display, audio, and video advertising delivered through advertising impressions. The company generally enters into arrangements with advertising agencies that purchase advertising on Spotify's platform on behalf of the agencies’ clients. These advertising arrangements typically specify the type of advertising product, pricing, insertion dates, and number of impressions in a stated period. For the year ending 31 December 2019, Spotify's ad-supported service accounted for 10.31% (EUR 678.0 million) of total revenue.
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