Spotify’s decision (alongside other streaming services) to appeal against new songwriter-royalty rates set by the US Copyright Royalty Board (CRB) has caused fury among the music-publishing community. It’s unlikely to be settled soon, too. “That will be a long drawn-out process. It’s just the nature of the business,” Spotify’s chief financial officer Barry McCarthy told analysts last night, in response to a question about the likely timeline for Spotify’s appeal of the CRB ruling.
We reported on the core figures from Spotify’s first-quarter financials yesterday, including its milestone of 100 million premium subscribers, out of 217 million monthly active users (MAUs) overall. Spotify’s filing also revealed that it paid around €50m ($56m) for podcasting firm Parcast earlier this month, taking its spend so far this year on podcast companies to €358m ($400.6m). That means up to $100m left in Spotify’s war-chest for podcast acquisitions this year (although the company had set aside ‘$400m-$500m’ so it could be done for now).
Other notes of interest from the earnings call include CEO Daniel Ek’s claim that there are now 3.9 million ‘creators that are engaging directly with Spotify’s platform’, and nearly 40,000 new tracks being uploaded every day. “In Q1, we saw a 20% increase in the number of artists streamed on our platform year-over-year and a 29% increase in the number of artists with at least 100,000 listeners,” added Ek.
He deflected a question about the competitive threat posed by Amazon and Google’s new free music tiers for their smart speakers, stressing Spotify’s desire to be on every device, while adding that “while the growth rate of voice speakers is impressive, it’s still very small when you compare it to mobile”. He also suggested that Spotify’s “future for our margin growth” is “not about renegotiation of the deals” [with labels] but rather about the company’s “marketplace strategy” – its tools for marketing artists. That hints, again, at the launch of more tools that labels and artists will pay Spotify to use.
Other comments: “personalisation is absolutely key” to Spotify’s podcast plans, in terms of recommending shows to users; “there’s some willingness” from regulators to engage with the issues around access to platforms – but no news on Spotify’s specific anti-competition complaint against Apple in Europe; and Ek expressed confidence that streaming isn’t anywhere near hitting a ceiling yet. “The music industry market is just way bigger than most people realise. There are billions of customers out there in the world that are consuming music today,” he said. “ Most of them are yet not in streaming. We are all, of course, trying to get the music industry into streaming. And that is the trend… that will keep going for at least another five to 10 years.”
There was also some detail about how Spotify feels it can add value to the podcasting industry, through advertising. “When it comes to monetisation, it is true that a lot of podcasters are struggling and have to set up their own sales forces in order to succeed creating revenue for themselves. We look at that long term as a massive opportunity, and podcasters are eager for us to get into this space,” said Ek. McCarthy chimed in: “Let me add that Apple, of course, historically been largest player in the podcast space. They don’t have an advertising business, and there’s been no innovation in podcast advertising in its entire history,” he said. “So ads gets baked into RSS feeds and delivered to all listeners regardless of their interest in the demographic profile and any particular interest in any particular ad. So we’re working hard on building digital ad-sourcing technology.”