Spotify’s Earnings Highlight the Potential of the Music Industry
Spotify reported strong Q3 2023 earnings which highlighted some potentially positive trends, like growth in streaming and profitability for the overall music industry.
Spotify reported its third-quarter earnings on 10/24/23, which highlighted some trends that may prove positive for the global music industry. These include continued growth in the streaming segment and developments that may lead to increased profitability for the company and its competitors.
Streaming is Still Growing
Spotify recorded a 26% increase in total monthly active users (MAUs) in the third quarter of 2023 versus the third quarter of 2022.[1] [2] This included a 16% increase in premium (paying) accounts to a record 226 million paid subscribers and a 32% increase in ad-supported (free) accounts. This translated to an overall 11% increase in total revenue, with a 10% and 16% increase in premium and ad-supported revenue, respectively. Note that premium revenue accounted for more than 86% of total revenue.
Why This Is Important
Streaming is the dominant means by which individuals consume music, representing 84% of global music revenues in 2023.[3] Spotify is one of the major players in the music streaming industry. Therefore, continued growth in Spotify’s streaming business may be indicative of the overall potential of the music streaming industry and, by extension, the global music industry.
Spotify Successfully Raised Subscription Prices
Spotify raised the price of its subscription streaming services by $1 in the third quarter. This is the first increase since the company launched streaming services in 2011. The company had been under pressure from music industry executives, musicians, and rival firms to lift prices. The company noted that it did not experience any adverse effects, such as cancellations, from the price move.[4]
Why This Is Important
With 226 million paying subscribers, the price move helps to increase total revenue and flows to the company’s bottom line. It also provides more opportunities to monetize its customer base.
As the largest music streaming platform, Spotify may set the tone for the industry. Spotify’s price increase may allow other streaming services to raise prices and pave the way for additional price increases.
Focus on Profitability
Spotify is placing more emphasis on efficiency and profitability. Despite its size, the company has consistently posted losses, placing more emphasis on growing its customer base. However, the company has been working to lower operating expenses and focus on efficiency and profitability.
Why This Is Important
Profits are good. Additionally, Spotify’s moves to increase prices and focus on profitability may allow its competitors to do the same, which may lead to a more profitable music industry and more attractive investment opportunities.
$MUSQ: the only pure music ETF with $SPOT.
The MUSQ Global Music Industry ETF (MUSQ)
The MUSQ Global Music Industry ETF (MUSQ) seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the MUSQ Global Music Industry Index (MUSQIX). The MUSQIX Index is designed to provide exposure to global, publicly traded companies and royalty funds with a core business interest in the global music industry.
MUSQ may provide individuals with an attractive vehicle to gain exposure to the global music industry.
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For a complete list of MUSQ holdings, please click here.
[1] Unless otherwise noted, all data sourced from: Q3 2023 Update, Spotify Shareholder Presentation, 10/24/2023
[2] All comparisons are third quarter of 2023 relative to the third quarter of 2022
[3] Olson, Cathy Applefeld, U.S. Recorded Music Revenues Reach All-Time Mid-Year High of $8.4 Billion, Forbes, 9/18/23
[4] Steele, Anne, Spotify Plans to Raise Price of Premium Plan in U.S., The Wall Street Journal, 7/21/23
MUSQ Global Music Industry Index ETF is offered by prospectus. Carefully consider the investment objectives, risks, charges, and expenses. This and other important information can be found in the MUSQ ETF prospectus, which should be read carefully before investing and can be obtained by visiting https://musqetf.com or by calling 1-855- MUSQ-ETF(687-7383).
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