Global "music giant" Spotify recently surpassed 300 million paying subscribers, becoming the first music streaming platform to enter the "300 million club." Among content platforms, the only corporations with more than 300 million users who pay a monthly subscription fee are Netflix and Spotify. Even YouTube, the world's largest video platform with about 2.5 billion users worldwide, has only about 125 million paying subscribers.
The market says Spotify has shifted to a structure that generates stable revenue by expanding paying subscribers based on its personalization features. Analysts say its push to diversify into an all-in-one platform offering various video, podcasts, audiobooks and fan experiences—beyond a simple music-listening app—is bearing fruit.
According to the tech industry on the 7th, Spotify said its monthly active users (MAU) in the second quarter of this year reached 777 million, up 12% from a year earlier. Of those, premium (paid) users who pay a monthly subscription totaled 300 million, an increase of about 24 million (9%) in one year. Paying users grew despite subscription price hikes in major markets such as North America this year.
The industry sees Spotify's expansion strategy, pursued since 2019, as delivering results. Launched in 2006 as a dedicated music streaming platform, Spotify began in 2019 to make large-scale investments to leap into an all-in-one platform offering personalized audio content and diverse fan experiences. At the time, Spotify founder Daniel Ek declared, "We will grow into the world's No. 1 audio platform."
From 2019 to 2022, Spotify invested more than $1.2 billion (about 1.7 trillion won) solely in mergers and acquisitions (M&A) of podcast producers and audio technology corporations, and is estimated to have spent at least $300 million (about 420 billion won) on exclusive content license deals with prominent podcasters and influencers. As a result of its aggressive investments then, Spotify expanded its business into podcasts, audiobooks and even book sales.
After acquiring free users, Spotify focuses on converting them into paying subscribers based on personalized content recommendations, and its range of video and audio content beyond music boosts app engagement and prevents churn, strengthening the "lock-in" effect. Gustav Gyllenhammar, Spotify's senior vice president of markets and subscriptions, said at a Spotify investor event in May, "We are investing in accelerating personalization and localization using artificial intelligence (AI) and in expanding average revenue per user (ARPU)," adding, "Our long-term goal is to increase paying subscribers to 1 billion."
The core of its user retention strategy is sophisticated recommendation and personalization. Spotify recommends likely-to-be-favored music and related content based on users' listening histories. According to the company, as users consume music, podcasts, audiobooks and other content, they generate an average of 3.4 trillion taste signals each day. Based on that, Spotify is building a "Large Taste Model" that predicts and generates user preferences.
The year-end wrap-up service "Wrapped," which organizes each user's annual listening history, is Spotify's signature personalization feature. Last year, Wrapped content was shared more than 620 million times.
This year, it has put front and center a "conversational personalization" feature that creates playlists when users verbally request the content they want and AI builds it. For example, if instructed, "Recommend energizing music for a Monday morning," the Spotify app combines an individual's listening history with real-time trends and charts to generate a playlist. It is also developing AI tools that let users create remixes and cover songs directly in the app.
Gustav Söderström, Spotify's co-CEO, said, "We are moving beyond the era of curation and recommendation into the era of 'generation,'" adding that it will enhance AI-based personalization through interaction with users.
It is steadily strengthening non-music content offered to paying subscribers. Early this year, Spotify partnered with the home fitness platform Peloton to introduce fitness content, and more recently it unveiled "Spotify Reserve," which lets die-hard fans of specific artists purchase tickets before general concert ticket sales begin. In addition, more than 700,000 audiobooks and as many as 7 million podcast programs are available in the Spotify app.
Nicole Burrow, Spotify's vice president of product design, said, "Our goal is to make the time users spend in the Spotify app feel valuable."
Spotify's presence is growing in Korea as well. According to market research firm Wiseapp Retail, Spotify had 6.22 million users in Korea last month, overtaking Melon (5.93 million). Spotify's users in June last year numbered 3.89 million, a rise of nearly 60% in one year.
Spotify ramped up its push into the Korean market in 2024 by introducing the ad-supported free plan "Spotify Free." Early in the year, it also launched a low-cost plan exclusively for college students at 6,000 won per month to target younger users. This year, it has been chasing Melon with an aggressive marketing strategy by partnering with Naver to link Spotify subscription benefits to Naver Plus Membership.
It is also expanding touchpoints with users and offering experiences beyond music listening by hosting various offline, hands-on events such as "Spotify House," and increasing collaborations with artists, including idol groups, in step with the global rise in K-pop's popularity.