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Spotify announced a new listening feature that incorporates artificial intelligence technology on Wednesday (Feb. 22). Instead of clicking through an editorial playlist like Today’s Top Hits or an algorithmic one like Discovery Weekly, premium users in the U.S. and Canada can now turn to “DJ,” which supplements algorithmic recommendations with commentary about the selections delivered via an AI voice platform.
DJ “will sort through the latest music and look back at some of your old favorites — maybe even resurfacing that song you haven’t listened to for years,” Spotify wrote in a blog post. “It will then review what you might enjoy and deliver a stream of songs picked just for you. And what’s more, it constantly refreshes the lineup based on your feedback. If you’re not feeling the vibe, just tap the DJ button and it will switch it up.”
Sulinna Ong, Global Head of Editorial at Spotify, praised DJ as “a new and unique music experience” in a statement. “I’m personally so excited about DJ because we’re able to harness this power to tell an artist’s story, to be able to provide context around their work and their songs in a broader cultural arena like never before,” she added.
Spotify’s blog post also noted that “early tests” of DJ — the feature is still in beta mode — indicate “that when listeners hear that additional audio context alongside their music recommendations, they’re more willing to try something new and listen to a song they may have otherwise skipped.”
The streaming service said that technology from OpenAI, the company that also developed ChatGPT, helps furnish “insightful facts about the music, artists, or genres you’re listening to” — facts sourced in part from Spotify’s editorial team. The AI voice of DJ is based on that of Xavier “X” Jernigan, the platform’s head of cultural partnerships, who previously hosted a morning show podcast for the streaming service. Spotify announced that it acquired Sonantic, an AI voice platform, last June.
Generative artificial intelligence has become a red-hot topic in tech in recent months thanks to ChatGPT and new image generators like DALL-E 2. AI is already being incorporated by tech companies like BandLab and Boomy, which aim to make the barrier to artistic creation lower by providing aspiring acts access to AI-powered music-making tools.
ValueAct Capital Management, a hedge fund with a history of being an activist investor, now holds a stake in Spotify. Mason Morfit, the San Francisco-based company’s chief executive officer and chief investment officer, revealed the firm’s ownership in Spotify shares at an event at Columbia University on Friday (Feb. 10), according to reports.
Spotify shares rose 3.6% to $125.16 on Friday following the news.
ValueAct, which did not reveal the timing of the investment, enters the picture as Spotify appears determined to improve its margins and reign in costs. Two weeks ago, Spotify announced a reorganization and layoff of 6% of its staff. Chief content officer Dawn Ostroff, who used lucrative licensing and original content deals to build Spotify’s podcast business, departed the company. The New York-based executive’s duties were absorbed by chief business officer Alex Norström out of Spotify’s Swedish headquarters. In the fourth quarter, Spotify showed a willingness to pare costs by laying off staff in its original podcasts and some of its live programming.
“During the boom, it applied these powers to new markets like podcasts, audiobooks and live chat rooms,” ValueAct’s Morfit said according to The Financial Times. “Its operating expenses and funding for content exploded. It is now sorting out what was built to last and what was built for the bubble.”
ValueAct owns shares in dozens of companies including Twenty-First Century Fox, Nintendo, The New York Times Company, Microsoft and Adobe Systems.
Exactly what this means for Spotify’s decision-making isn’t immediately clear. Like Meta, Alphabet and some other prominent tech companies, Spotify has a dual-class share system that grants its founders with enough voting power to control corporate governance. In a single-class structure, shareholders’ voting power is proportional to the number of shares they own. In a dual-class system, ordinary shares have far less voting power than a second type of shares.
Spotify’s co-founders own only 38% of outstanding common shares but own 100% of the company’s “beneficiary certificates,” each of which has 10 times the voting power of an ordinary share but no economic rights. The arrangement gives CEO Daniel Ek and co-founder Martin Lorentzon 74.3% of voting power, according to Spotify’s 2022 annual report, and ensures the duo can choose the board of directors despite owning a minority of the company’s economic interest.
As of Dec. 31, 2022, Ek has 16.5% of outstanding common shares and 31.7% of total voting power while Lorentzon owns 11.1% of ordinary shares and 42.6% of total voting power. The next-largest shareholder, Baille Gifford & Co, owns 14.5% of ordinary shares and 5.1% of voting power. Chinese tech giant Tencent Holdings owns 8.6% of ordinary shares, but Ek exercises those shares’ voting rights.
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Spotify finished 2022 with more than 100 million tracks in its catalog, according to the company’s annual report filed Thursday (Feb. 2). That’s 18 million more than the 82 million tracks streaming service had the year prior — which averages to about 49,000 new songs per day.
By most measures, 49,000 tracks a day is a huge amount of music. At three minutes per track, it would take about three and a half months to listen to a single day’s worth of new music from start to finish.
But 49,000 is only half the number that’s been cited in recent months. Universal Music Group chairman and CEO Lucian Grainge said in September 2022 that 100,000 tracks were being “added to music platforms every day.” Earlier that month, former Warner Music Group CEO Stephen Cooper said “roughly 100,000” tracks were uploaded “to SoundCloud, Spotify, Apple” and other platforms “on any given day of the week.”
Not that self-reported numbers have always been in sync with executives’ statements. In April 2019, Spotify CEO Daniel Ek said “nearly 40,000” new tracks were being uploaded daily. Based on Spotify’s own disclosures, however, the daily average that year was 27,000. In Feb. 2021, Ek said the number of daily tracks added to its catalog had surpassed 60,000. Spotify’s disclosures showed the daily average was 55,000 in 2020 — perhaps a function of artists staying home during the early days of the pandemic — but fell to 33,000 in 2021.
But there certainly could be 100,000 new tracks uploaded daily in aggregate. There’s more music on the internet than Spotify adds to its catalog. SoundCloud, for example, adds tracks at a faster rate than other platforms because it licenses music from record labels and distributors while also accepting direct uploads from independent musicians. The service currently boasts 40 million artists on the platform who are unlikely to be found elsewhere. When I wrote about the size of music catalogs in April 2022, SoundCloud had added 50 million tracks in about 12 months, or about 137,000 per day. It appears to have largely maintained that growth rate. From Feb. 2022 through Jan. 2023, SoundCloud added 45 million tracks — an average of 123,000 per day — according to numbers found in the company’s press releases.
Whether the number of new tracks being uploaded daily is 49,000 (17.9 million annually) or 100,000 (36.5 million annually) matters. Anybody following trends, making forecasts or deciding on M&A strategies should understand the size of the market and where the opportunities lay. The lower number is the amount of music landing on the world’s most popular audio streaming platform. The higher number better represents the size of what’s called “the creator economy,” or the universe of music being produced by novices, professionals and everybody in between.
The future of music is more music. People will still flock to chart-topping artists and congregate around a small number of superstars. But the barriers to entry are now so low that virtually anybody can commercially release music, and music streaming services increasingly serve every music niche in existence. The music creator tools market was worth $4.1 billion in 2022, according to MIDiA Research, and MIDiA forecast that the number of people paying for music software, skills sharing and learning will grow from 30 million in 2021 to nearly 100 million by 2030.
The technology to get that music online is well-established. Decades ago, Apple’s GarageBand opened the doors to self-produced music. Today, making music is far easier. BandLab, an online music creation platform, has 60 million users. Spotify-owned Soundtrap is another online music creation and collaboration tool. Any number of low-cost distributors, such as DistroKid and TuneCore, will get creators’ music to download and streaming sites around the world. LANDR cuts out the middleman and acts as both digital audio workstation and distributor.
That glut of music is good for some, bad for others. It’s great for distributors and developers of music creation tools. It’s bad for record labels that must fight harder to get their tracks heard and risk ceding market share. It’s a mixed bag for consumers who have unlimited access yet face a paradox of choice. How the industry will deal with all this music is unclear. What’s certain is there’s a lot of music out there — and the pace of new releases is only going to accelerate.
Drake reportedly became the first artist in Spotify history to surpass 75 billion collective streams, and used the moment to call out the streamer and advocate for artists.
“We should get bonuses like athletes to motivate the future artists to be consistent and competitive,” he wrote in an Instagram Story resharing a graphic that looks to be from Spotify, but which the streamer does not appear to have shared on its official accounts. “So feel free to send me a LeBron sized cheque[,] I have enough dinner plates.”
To drive his point home even further, the rapper punctuated the thought with a laughing emoji and heart with an arrow running through it, and made sure to tag Spotify’s Instagram handle, too.
Billboard has reached out to Spotify for comment.
The superstar’s streaming success has been fueled in part by his latest string of singles and guest features, including No. 1 hit “Jimmy Cooks” and follow-up “Circo Loco” — both with 21 Savage — as well as Popcaan’s “We Caa Done,” DJ Khaled’s “Staying Alive” also featuring Lil Baby and Future’s “Wait for U” with Tems.
Meanwhile, Drake and 21 Savage’s latest hit “Rich Flex” recently ascended to the dual summits of both the R&B/Hip-Hop and Rhythmic Airplay charts — the collab’s latest No. 1 tallies after also peaking atop the Hot R&B/Hip-Hop Songs and Hot Rap Songs charts as well.
Next week, Drizzy is set to hit the stage at the private jet complex Scottsdale Hangar One in Scottsdale, Ariz., for h.wood Homecoming ahead of Super Bowl LVII.
Check out Drake’s message to Spotify here before it expires.
Spotify’s share price rose 12.7% to $112.71 on Tuesday (Jan. 31) following the company’s earnings release for 2022’s fourth quarter earlier in the day.
Now with a market capitalization of $21.8 billion, Spotify has more than overcome the investor exodus following its underwhelming third-quarter earnings results. After delivering a weaker-than-expected gross margin on Oct. 25, Spotify’s share price fell 13% to $84.42 and bottomed out at $69.29 on Nov. 4. Tuesday’s closing price marked a 62.7% improvement in fewer than three months.
Investors want Spotify to continue adding subscribers while improving its margins. Tuesday’s earnings results delivered on both fronts. Its fourth-quarter subscriber growth of 10 million handily beat guidance of 7 million, giving the company 205 million subscribers globally. The company’s monthly active user base of 489 million was 10 million ahead of guidance.
In the fourth quarter, Spotify’s gross margin of 25.3% was 80 basis points — eight-tenths of a percentage point — above guidance “due primarily to lower podcast spend along with broad-based favorability in our core music business,” said CFO Paul Vogel during Tuesday’s earnings call.
Spotify’s licensing deals with record labels and publishers give it little room for improvement on recorded music margins, which were 28% in 2021. Podcasting, however, gives Spotify an opportunity to attract advertising dollars with meaningfully better margins. During a June 2022 presentation to investors, Spotify executives said they expect podcast margins to reach 30-35% within three to five years and 40-50% further in the future.
Just last week, investors were shown a new commitment to cost-cutting when Spotify announced on Jan. 23 that it would lay off 6% of its global headcount. Among the departures — though technically not part of the layoffs — was chief content officer Dawn Ostroff, the engineer of the company’s strategy to build its podcast business by attracting marquee names such as Joe Rogan, Kim Kardashian and Barack and Michelle Obama. Her exit could signal an end to an era of expensive content deals that helped make Spotify the most popular podcast platform in many markets.
For the first quarter of 2023, Spotify forecasts 3.1 billion euros ($3.37 billion) of total revenue and gross margins of roughly 25% excluding severance charges, and an operating loss of 194 million euros ($211 million), including 35 million euros to 45 million euros ($38 million to $49 million) in severance charges.
“Gross margins and operating expenses are expected to improve throughout the year,” said Vogel, adding that first-quarter margins will be the low point for 2023 because “some of the investments we made in the back half of [2022] is still slightly impacting Q1.” In addition, with the recent 6% reduction in headcount, “we see our operating expenses growing slower with a material improvement in our operating loss compared with 2022,” he added.
Spotify CEO Daniel Ek stressed his company’s focus “on tightening our spend and becoming more efficient” in the company’s fourth quarter earnings call on Tuesday (January 31) — the first such call since Spotify announced it was laying off 6% of its global workforce.
In a statement following the layoff announcement, Ek wrote that “in a challenging economic environment, efficiency takes on greater importance.” And the idea of “efficiency” was hammered home again and again on the latest earnings call — the word was sprinkled liberally throughout the remarks of both Ek and CFO Paul Vogel. “The next era of Spotify is one where we’re adding speed plus efficiency,” Ek said, not one “just focused on speed or growth at all costs.”
But he also emphasized that “this doesn’t mean that we’re changing our strategy” overall. “We will continue to work to build the platform of the future,” Ek vowed, “and that will take investment in new opportunities that we outlined, like podcasts and audiobooks.”
While Ek acknowledged that Spotify “probably got a little carried away [in 2022] and over-invested relative to the uncertainty we saw in the market,” he said that, given the choice, he “would do it again.” According to Ek, not only did that investment help grow Spotify’s user count — the company added premium subscribers at a higher-than-expected rate — but it helped differentiate Spotify from its competitors.
Responding to a question about how Spotify was working to compete with TikTok, Ek said “we’re in a better position competitively than we’ve been for many many years.” By adding podcasts and audiobooks to Spotify’s music offering, he added, the platform has created “a much more resilient consumer experience.”
While Ek had said Spotify was exploring raising U.S. subscription prices during an earnings call last year, he said “I don’t have anything specific to announce at this point” on Tuesday. But he noted that the platform raised prices in “more than 40 markets around the world” last year and that “our priority is to grow revenue as fast as we possibly can.”
When asked about potential price increases a second time, Ek responded that “we’re thinking how we can grow our business the best possible way.” “Sometimes that is keeping the price low to grow the number of users on the platform,” he continued. “Sometimes it is increasing the revenue per user. Sometimes it’s increasing our margin per user… the important part is that this is something that creates win wins with our label partners too.”
Investors asked Spotify for additional information about two 2022 initiatives, its moves into audiobooks and selling concert tickets, but company executives were scant on specifics. “It’s early days on audiobooks,” Ek said. “We’re seeing some encouraging signs. We’re definitely seeing people take up the offering.” He added that “audiobooks have a massive opportunity and there are very few consumers currently participating in the ecosystem,” echoing his comments from Spotify’s 2022 Investor Day.
When it came to Spotify’s nascent live events business, Ek underscored that his company isn’t aiming to “go compete with the [existing live music] ecosystem.” Instead, he said, Spotify hopes to “enable the ecosystem.” “Users are asking us, ‘help me find more great things to go watch,’” Ek explained. That translated to a “tremendous uptick in the number of people visiting the concerts tab on Spotify in 2022.”
“If we can be a partner to creators and help them sell more of their tickets,” Ek added, “that’s a meaningful increase to many artists’ livelihood, which is great and something we’re focused on.”
Spotify ended 2022 with 205 million subscribers, annual revenue of 11.7 billion euros ($12.4 billion) — up 21% from 2021 — and an acknowledgment that “things change” regarding the company’s bold investment in podcasting and its recent “tightening” of spending.
“In hindsight I probably got a little carried away and over invested relative to the uncertainty we saw shaping up in the market,” said CEO Daniel Ek in an earnings call with investors on Tuesday (Jan. 31). “So we are shifting to tightening our spend and becoming more efficient.”
Ek added that “it was the right call to invest and I would do it again” because it set the company apart from competitors, but the souring macro economic environment requires them to pull back. “To be clear this doesn’t mean we are changing our strategy,” he asserted.
The company spent hundreds of millions of dollars acquiring exclusive rights to podcast programming (see: Joe Rogan, Prince Harry and others) and startups, but in recent months began eliminating some original shows and trimming staff at its Parcast and Gimlet studios. Earlier this month, Spotify announced it would shed 6% of its workforce, roughly 600 employees. It also canceled numerous shows that it had been promoting on its separate Spotify Live app.
“You go for growth first and then you seek efficiency,” Ek said.
Elsewhere in the call, the company laid out its fourth-quarter results, with revenue of 3.166 billion euros ($3.38 billion), representing 18% growth year-over-year. Subscription revenue was 2.7 billion euros ($2.88 billion) of that tally, a 18% increase year over year. Advertising revenue was 449 million euros ($479 million), up 14% year over year. Its user base grew to 205 premium subscribers, up from 195 million in Q3, and 295 million free (ad-supported) users, up from 273 million. Total monthly active users (MAUs) have hit the 489 million mark, up from 456 million last quarter.
Average revenue per user was 4.55 euros ($4.85) in the fourth quarter, down slightly from 4.63 euros ($4.94) in the third quarter. Excluding the impact of the foreign exchange market, Spotify attributed the change to a “product and market mix.”
Spotify’s gross margin of 25.3% — 80 basis points above guidance, the company said — was slightly better than the 24.7% registered in the third quarter but still a full percentage point below the 26.5% in the prior-year period. The company attributed the change to “lower investment spending and broad-based music favorability.”
Spotify reported an operating loss of 231 million euros ($246 million), up from 228 million euros in Q3 and a 7 million euro loss back in Q4 2021. A slew of higher personnel costs due to headcount growth — that has since been halted (except for internships) — and higher advertising costs, as well as currency movements, was cited for the rise in losses during the quarter. The company also said that its business has more than 3.4 billion euros ($3.6 billion) in liquidity and that its free cash flow was actually in the negative in the quarter — by 73 million euros — but that for the full year the company ended with 21 million euros ($22 million).
Financial Metrics (Q4 2022 vs. Q4 2021)
Revenue: 3.166 billion euros ($3.38 billion), up 18% year over year from 2.689 billion euros
Gross margin: 25.3%, compared to 26.5% the prior-year quarter
Operating loss: 231 million euros, up from a 7-million euros loss
Free cash flow: 73 million euros, down from 103 million euros
Listener Metrics (Q4 2022 vs. Q3 2022)
Paid subscribers: 205 million, up 5% from 195 million in Q3
Ad-supported listeners: 295 million, up 8% from 273 million in Q3
Total monthly active users (MAUs): 489 million, up 7% from 456 million in Q3
Average revenue per subscriber: 4.55 euros, up from 4.63 euros in Q3
Q1 2023 Guidance
Revenue: 3.1 billion euros
Subscribers: 207 million
MAUs: 500 million
Gross margin: 24.9%
Operating loss: 194 million
Muni Long released the Spanish version of her single “Hrs & Hrs” on Monday (Jan. 30) as part of her new Spotify Singles.
With The Avila Brothers taking the reins on production, the Spanish-language track finds the rising R&B star asking, “¿Pero te puedo cantar…en español?” (i.e. “But can I sing to you…in Spanish?”) before launching into the sultry groove.
“Lo tuyo, es mío, ahora/ Puedo hacer esto por horas/ Sentar y hablarte aquí por horas/ Regalarte unas rosas/ Nos bañamos en las olas/ De champaña y una cena/ Pero eres tu que me devoras,” she croons, roughly translating the sentiments of the 2022 slow jam, which was named one of Billboard‘s best R&B songs of the last year.
As part of the Spotify Singles, Long also gave The Carpenters’ 1971 classic “Superstar” a rhythmic spin, not unlike Luther Vandross’ famous cover, singing, “Long ago and oh, so far away/ I fell in love with you before the second show/ And your guitar, it sounds so sweet and clear/ But you’re not really here, it’s just the radio/ Don’t you remember, you told me you loved baby/ You said you’d be comin’ back this way again, baby/ Baby, baby, baby, baby, oh baby/ I love you, I really do.”
Long is currently nominated for best new artist at the upcoming 2023 Grammy Awards, while “Hrs & Hrs” picked up nods for both best R&B performance and best R&B song. Ahead of the telecast this Sunday, she was celebrated with a special event at the Grammy Museum.
Stream Long’s “Horas y Horas” and her “Superstar” cover below.
Spotify has launched a new playlist to amplify the voices of Iranian women, who have for the last four months have led the fight towards human rights in Iran.
The playlist, titled “Women of Iran,” includes songs by iconic Iranian singers, including Googoosh, Mahasti and Hayedeh, alongside artists like Shervin Hajipour and Toomaj Salehi, who were both arrested and imprisoned after sharing music in support of the fight against the Islamic Republic’s injustices. Hajipour, who received a whopping 95,000 submissions for The Grammys’ new best song for social change award, was released following international pressure back in October.
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“The Academy is deeply moved by the overwhelming volume of submissions,” said Recording Academy CEO Harvey Mason Jr in a statement. “While we cannot predict who might win the award, we are humbled by the knowledge that the Academy is a platform for people who want to show support for the idea that music is a powerful catalyst for change.”
After his October arrest, 32-year-old rapper Salehi has remained in police custody and is at risk of receiving the death penalty, according to BBC.
As a part of the playlist launch, Spotify is utilizing their playlist clips feature, which are likened to “stories” connected to a playlist, providing a platform for Iranian musicians, comedians, designers, producers and more to speak on topics like culture, art, creative process and the importance of freedom of expression. The playlist also includes diasporic Iranian artists, including Rana Mansour, Snoh Aalegra, and Iranian-Dutch singer Sevdaliza, who has released a number of songs in support of the ongoing revolution in Iran.
Stemming from the death of Mahsa Amini at the hands of Iran’s “morality police” but rooted in over 40 years of oppression, the current Iranian revolution begun in late September and has resulted in over 500 deaths officially, although some human rights groups estimate the number to be over 5,000. The number of individuals arrested spans beyond 20,000, while four known executions have taken place, with many more estimated to come.
International uproar has ensued since the start of the protests, with government officials and global stars alike speaking out on the brutal injustices taking place under the authority of Iran’s Islamic Revolutionary Guards Corps. Justin Bieber, Kim Kardashian, Samuel L. Jackson, Jason Momoa, Britney Spears and Bella Hadid are among the celebrities who have used their platforms to bring awareness to the ongoing fight, while a massive show of international solidarity led to a vote in the United Nations to remove Iran from the Commission on the Status of Women.
In Iran, kissing and hugging in public, women singing and dancing in public, among other basic acts, are illegal. Women also face discrimination in matters regarding marriage, divorce, inheritance and decisions relating to children. Members of a number of religious groups, including Baha’is are heavily persecuted in Iran, considering that Zoroastrians, Jews and Christians are the only recognized religious minorities. These human rights violations, along with income inequality and lack of freedom of expression has brought the Iranian public to their boiling point time and time again.
While there is no end in sight, the playlist’s creator Leila Kashfi emphasizes the importance of keeping the voices of Iranians alive, writing on Instagram, “For decades, the Islamic Republic has forced Iranians to suppress the beauty of Persian culture – a culture founded thousands of years ago in music, dance, romance, & tolerance. The [Islamic Republic] targets artists because music fuels revolution.”
Check out the playlist below.
Give her all the flowers…again! On Thursday (Jan. 26), Miley Cyrus‘ “Flowers” became the most streamed song in a week in Spotify history for the second week in a row.
The streaming giant used Twitter to share the news, writing “It’s official…The record has been broken by @MileyCyrus herself on January 26, making #Flowers the most streamed song in a single week in Spotify history.”
While Spotify didn’t share specific numbers, the hit single first achieved the feat in the week of Jan. 19, making it all the more impressive that Cyrus managed to outdo herself for a second consecutive week after also debuting in the previous frame at No. 1 on the Billboard Hot 100.
The success of “Flowers” has also boosted all the other songs in Cyrus’ proverbial garden of hits, with her entire discography from “Wrecking Ball” to “Midnight Sky” making a truly remarkable 65 percent gain in the week ending Jan. 19 according to Luminate — from 20.7 weekly million official on-demand U.S. streams to 34.2 million. It also fed the streaming numbers of Bruno Mars’ “If I Was Your Man” — which “Flowers” slyly plays on without sampling or interpolating any of the No. 1 torch song melodically.
After the song bloomed at No. 1, Cyrus tweeted a note of gratitude to her fans, writing, “Thankful that Flowers is Number 1 around the world. This song is dedicated to my fans & the steadfast self love I wish for each of you. Forever grateful, Miley.”
Check out Spotify’s announcement about “Flowers” record-breaking second week below.