We reported on Spotify’s latest financial results earlier this week, but yesterday the company’s 20-F annual report form was filed with US regulator the SEC, going into more granular detail about its business.
Here’s one nugget from the filing: music licensed to Spotify by the three major labels and indie licensing agency Merlin accounted for around 75% of Spotify streams in 2022. We wondered how that has changed over time, so we went back to past filings to find out.
What we found was that this percentage has been falling steadily. In 2017 the majors and Merlin accounted for 87% of Spotify’s total streams, but that proportion fell to 85% in 2018; 82% in 2019; 78% in 2020; 77% in 2021 and now 75% in 2022.
This trend isn’t a surprise: we know that the sector of DIY artists working through distributors has been growing. It’s just useful to have it quantified from a big DSP.
Last year, Midia Research estimated that self-releasing ‘artists direct’ saw their recorded music revenues grow by 25% to $1.5bn in 2021, with the increase in streaming share a key factor in that trend.
Here’s a caveat: independent labels who do not distribute through Merlin will be included in the 25% of non-major/Merlin streams on Spotify, so it’s not just DIY artists. We’ve changed our headline to reflect this since publication.
What else did we learn from Spotify’s 20-F filing? The company reached €34bn of lifetime payments to music rightsholders by the end of 2022, up from €26bn at the end of 2021.
That €8bn was thus around 68% of Spotify’s €11.73bn of annual revenues last year, with the caveat that the payouts figure is rounded. “In 2022, our expenses for rights holders grew by 21% compared to the prior year,” noted Spotify.
Another stat from the filing: Spotify listeners streamed 132bn hours of content in 2022, up 20% year-on-year, which matched its growth in monthly active users.
There is also some more context for Spotify’s recent round of layoffs, and CEO Daniel Ek’s admission that the company had “got a little carried away and overinvested relative to the uncertainty we saw shaping up in the market”.
The filing reveals that Spotify grew from 6,617 employees at the end of 2021 to 8,359 at the end of 2022. The company thus grew its headcount by 26.3% in 2022, before laying off 6% in January.
In the breakdown of costs across the different parts of its business, it outlines “an increase in personnel-related costs” of €316m in its R&D segment; a further €141m such increase within sales and marketing; and €104m of personnel-related costs filed under general and administrative costs.
The filing also reiterates that Spotify expects to incur between €35m and €45m of severance-related charges relating to the recent layoffs.
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