Spotify’s business model is still all verse, no chorus

Streaming is paying off handsomely – for Universal Music Group

Members of Abba on display at its Voyage event in Stockholm. The band, which has a deal with Universal Music Group, has returned with new music for the first time in nearly four decades. Photograph: Fredrik Persson/TT News Agency/AFP

Spotify’s corporate ears are largely attuned to podcasts these days, but even if they weren’t, the exact rates of growth in its active user base never feel like a perfect echo of the fortunes of the music industry. For the knotty business of whether artists are cutting through to listeners, the music labels are a better study.

The Stockholm-founded audio streamer now has 172 million premium subscribers and 381 million total monthly active users, it reported in an update to the market yesterday, while revenues from advertising have bounced back after the pandemic, taking its total quarterly revenues to a nifty €2.5 billion. It even turned a rare quarterly net profit – just the sixth time it has managed to do so since listing in 2018.

Still, Spotify’s financials can sound a bit like a song that is stuck on a verse and never quite reaches its chorus.

Universal Music Group, on the other hand, is striking the right chords. One of the big three music labels alongside Sony (Adele) and Warner Music Group (Ed Sheeran), Universal also published a quarterly update on Wednesday, its first since being spun off by former parent company Vivendi.


The label behind stars like Taylor Swift, South Korean phenomenon BTS and some Swedish crowd called Abba reported a 16 per cent rise in quarterly revenue to €2.15 billion, which is not too far behind Spotify in the grand scheme of things, and it is indeed swelling streaming revenues that have kept Universal in champagne of late.

New releases

Universal's adjusted earnings before interest, taxes and write-offs (its adjusted ebitda) came in at €461 million, with a little help from new releases from Billie Eilish, Drake and Japanese outfit King & Prince and continued sales of BTS and Olivia Rodrigo. It expects adjusted ebitda to grow more than 20 per cent this year.

Spotify, however, is much more reminiscent of a dice-rolling, investment-loving technology stock still to prove its business model is more than just an ephemeral hit. Its net profit for the quarter arrived at, ahem, €2 million. Founder and chief executive Daniel Ek noted that the company was "just getting started". What Universal's results show is that the music labels that control the supply of music aren't exactly finished just yet.Spotify's business model is still all verse, no chorus