87
FORTUNE.COM // NOVEMBER 2019
0
5
10
15
20
$25 billion2001 2005 2010 2015 2018
2019
PHYSICAL DIGITAL (EXCL. STREAMING)
OTHER STREAMING
GLOBAL RECORDED MUSIC INDUSTRY REVENUES
$ 19.1
BILLION
U.S. MUSIC INDUSTRY STREAMING REVENUES
0
1
2
3
4
5
6
$7 billion FIRST
6 MONTHS
OF 2019(^2015201620172018)
$2.3 B.
$7.4 B.
SOURCES: IFPI; RIAA
her album for three weeks straight—the first such recording art-
ist to do so, according to Nielsen SoundScan—without the work
ever landing on Spotify servers.
Swift 1, Spotify 0.
But while Taylor may have won the day, Spotify hardly suffered
in the long run. In fact, 2014 was the low point for music sales—
and the start of a resurgence for the business, led by Spotify.
Since the year of Swift’s Spotify defection, the global recorded
music industry has seen overall sales grow every year—from
$14.3 billion in 2014 to $18.1 billion in 2018. That’s predomi-
nantly thanks to paid streaming, according to the International
Federation of the Phonographic Industry, or IFPI. Today, paid
and ad-supported streaming together represent almost half of
all global recorded music revenue. (Physical sales of CDs and
records still account for 25%; the rest comes from other avenues,
like performance rights.) And Spotify—with 232 million month-
ly users and 108 million paying subscribers globally—leads the
pack with more than a third of the streaming market, estimates
U.K. market researcher Midia.
Even Swift has gained an appreciation for the benefits of
Spotify. Today, the entirety of the “Shake It Off ” singer’s catalog
is available to stream on the app, including 1989 and her latest
album, Lover.
Spotify and Ek have reaped the benefits of his platform’s rise. Ek
took the company—which he cofounded with Martin Lorentzon
in 2006 in Stockholm—public via a direct listing (rather than a
traditional IPO) in April 2018. Today, Spotify has a market value
of about $21 billion, and Ek himself has an estimated net worth
of nearly $2 billion. Analysts estimate that the company will
reach $7 billion in sales for 2019. Spotify’s overall prospects are so
robust, according to BCG, that it ranks No. 5 on this year’s Fortune
Future 50 list of the companies best positioned to generate long-
term growth.
But there’s no guarantee that Spotify will hold its position at the
top of the charts. Encouraged by streaming audio’s growth, tech
giants Apple and Amazon have entered the fray. Each has extraor-
dinarily deep pockets—not to mention a home court advantage
as the makers of the iPhones and Echo devices on which so many
listeners access their music. Meanwhile, the maturation of major
streaming music markets such as the U.S. and the U.K. has Spoti-
fy and its rivals chasing emerging opportunities in Brazil, Mexico,
India, and “late adopter” nations like Germany and Japan.
Already, Spotify has found profits hard to come by. After
reporting its first-ever quarterly profits in the third and fourth
quarters of 2018, the company returned to losses in the first half
of this year, leading some investors to sour on the stock. Since
Spotify’s listing, its shares are down 30% versus a 15% gain for
the Nasdaq. And the painstakingly negotiated agreements that
Spotify has with the major labels—the majority of the music
streamed on the service is licensed from Universal, Sony, and
Warner plus indie agency Merlin—don’t leave the company
much room to boost its profit margins.
Spotify has been a savior for the music business. Now it needs
to prove that it’s not a one-hit wonder.
The shift to digital sent music sales
plunging. But thanks to Spotify and
streaming revenue, boom times are here
again. Here’s a look at the comeback.stream come true