How Spotify Became More Than a Music Service

Despite being the biggest name in music streaming, Spotify has had an eventful four years. Since 2020, the service has slowly reinvented itself while fighting lackluster earnings reports and profitability woes. Now, in 2024, Spotify is making record profits as more than a music streamer.

The Battle for Streaming

As a music streamer, Spotify has led the market for a long time while competitors like Apple Music and YouTube Music have lagged behind. This is a familiar dynamic that repeats in other streaming markets, most notably with Netflix and its embattled competitors, who are merging and restructuring to survive. In 2020, Spotify realized that its continued growth wouldn’t necessarily come from the music industry.

As a digital enterprise, businesses like Spotify find it much easier to grow their library and expand it beyond its original purpose. This also happened with Amazon, when it grew from a bookseller to the retail and tech giant that it is today. Other business models followed a similar trajectory, like video streaming, iGaming or video-sharing websites. These services first started with rewatchable videos or basic slot games and then, over time, expanded to cover new forms of entertainment as they went mainstream. Live-streaming is a great example of this – platforms like YouTube evolved to support creators who wanted to show live events, and social media sites quickly followed suit. In iGaming specifically, sites expanded their libraries with digitally simulated table games and then interactive live streams of real-life table games. That’s why live blackjack or roulette is available at online casinos, for example, when in most cases the site started with slots and gradually worked its way toward offering everything. This strategy enables businesses to build the plane as they’re flying it, as the saying goes, and introduce more expensive, varied products and services after proving successful in one market.

Spotify is doing the same, but its success looks a lot different from other business models. They came to prominence during the 2010s, when every trendy streaming business received a lot of outside investment. Like Twitter (now X), Spotify operated at a loss for most of its existence until undergoing its recent transformations. For the world’s #1 music streamer, their newfound success was found in podcasting and audiobooks instead.

Spotify’s Three Transformations

Spotify has gone through several big changes in the last four years, but they can broadly be summarized into three categories.

Spotify & Generative AI

First, Spotify has never given up ground as a music streamer. Since 2023 they have embraced the latest generative AI technology to make it easier for music listeners on the platform. This started with their AI DJ and so-called ‘daylists’. The DJ used AI to make playlists based on your music taste, an improvement over their other predictive algorithms in the past. On the other hand, ‘daylists’ track user listening habits throughout the day and then make a new playlist. That playlist tries to match your energy at different times of day, depending on when you listen to certain genres.

Their most recent AI tool is the AI playlist, which works like other text-prompted LLMs. Users can type moods, phrases, references, and other typed-out cues that the AI will use to make a playlist. Then, in a conversational process, you can query, tweak, and fine-tune the list to make it perfect for you.

Spotify’s Podcasting Network

Spotify first added podcasts in 2015, along with other video features that received little to no fanfare. That changed in 2022 after Spotify made headlines all over the world for gambling over $1 billion on grabbing the biggest names in podcasting. Then, in 2023, more flailing earnings reports sparked panic amid pundits and speculators alike.

That anxiety has subsided, at least for now, after Spotify posted record profits for its Q2 2024 earnings report. They made $295 million in profit after a nearly $500 million operating loss last year. While that’s nowhere near recouping their billion-dollar podcast investment, it’s a big step in the right direction.

Spotify’s Audiobook Library

Lastly, Spotify started to build an audiobook library throughout 2022 and 2023. Since then, they have introduced 250,000 book titles to premium subscribers, and it has proved so successful that they have invented a new tier for readers. It’s a cheaper tier that doesn’t come with other premium benefits, like their new AI music tools, and instead focuses on unlocking every book title instead.

It’s a near-certainty that the library will grow more in the future, as Spotify looks to capture more book lovers and compete with the market leader – Audible. As they pursue new audiences and anticipate future earnings reports, time will tell if Spotify’s transformation is a more permanent success or a flash in the pan.