Spotify is confident that its growth trajectory will take it past one billion users by the end of the decade.
Spotify’s founder and CEO Daniel Ek outlined the streaming giant’s growth objectives during its Investor Day event in New York.
“From everything I see, I believe that over the next decade, we will be a company that generates $100 billion in revenue annually and achieves a 40% gross margin and a 20% operating margin,” he said.
Spotify’s share price has fallen over the last year and hit a new low following Q1 results and 2022 forecasts in April.
The company generated revenue of €9.67bn ($10.36bn at current rates) in 2021. It recently revealed that it paid out $7bn to the music industry in 2021.
Chief freemium business officer Alex Norström outlined the growth objectives.
The company is the market leader with 422 million users worldwide.
“Right now, we’re on track to more than double our reach to over one billion users,” said Norström. “And with our vertical platform strategy, over time our ambition is to build the business toward an annual ARPU [average revenue per user] of €100. This means, on average, looking at both free and paid, we can significantly increase the total revenue across our entire user base.”
Spotify’s growth strategy is based on increasing engagement with users who come on board and then upgrade to individual or multi-user accounts.
The company is also focusing on ‘a la carte’ purchases - subscriptions to specific creators or one-off purchases - in a bid to drive up ARPU from its current €24 annual rate across all users (for premium users, ARPU in Q1 was €4.38 per month).
“As Free users convert, subscribers upgrade, and the ad business scales, the ARPU increases,” said Norström. “So we see plenty of potential to further increase ARPU.”
Spotify said that the ‘Live Experiences’ area is a natural extension of Spotify’s existing music business.
“Because of our scale, the data advantage we can offer to partners, artists, and venues is powerful,” stated the company.
Spotify predicted that the music streaming market alone will expand from $30 billion to nearly $80 billion in the next 10 years. That’s in line with the influential Goldman Sachs Music In The Air report.