Why Taylor Swift streams and Joe Rogan podcasts won’t be enough for Spotify to reach its $100 billion goal

The Swedish entrepreneur delivered Wednesday at the company’s first investor day as a public company, putting a massive growth target into the ether: $100 billion in annual revenue by 2030, roughly 10 times its haul from 2021.

Investors lauded the ambition, sending Spotify shares up 6% during an otherwise down day in trading. But does the single-day bump reflect confidence that the audio streamer is primed for eye-popping revenue gains? Or does the jump merely suggest that Spotify had become a bit undervalued after a down period for streaming and tech stocks?

While Spotify is an undeniable success story, reaching $10 billion in annual revenue last year, it’s hard to envision how the company hits a $100 billion target without major acquisitions.

As it stands, Spotify already owns roughly one-third of the global music streaming market, according to various research estimates. Its top competitors include some of the world’s deepest-pocketed companies: Apple, Amazon, Alphabet-owned YouTube, and Tencent. (Spotify and Tencent’s music unit own fractional stakes in each other’s companies.) Spotify could steal customers from its rivals, but a recent report by Midia Research found the company’s global music streaming market share fell from 33% in mid-2020 to 31% in mid-2021.

As a result, user growth seems like a more likely avenue for adding listeners. But it’s not clear how much more runway Spotify has around the globe.

Spotify said in its 2021 annual report that it operates in 184 countries and territories. While the streamer doesn’t report much data on regional usage and revenue, it already boasts roughly 136 million monthly active users in Europe, 93 million in North America, and 85 million in Latin America. 

Spotify could reach deeper into other countries—the company reported about 90 million monthly active users in the “rest of the world”—but those markets typically produce minuscule margins. In India, for example, a monthly premium subscription costs $2.30 per month, about one-fourth the price of a subscription in the U.S.

For Spotify to come anywhere close to $100 billion in annual revenue, the streamer likely will need to branch far beyond its core music business.

Ek and his top lieutenants remain enthusiastic about the podcasting business, describing it as a multibillion-dollar advertising opportunity. CFO Paul Vogel said Spotify tripled its podcasting revenue in 2021, eclipsing $200 million. But even if the podcast market grows annually at rates approaching 30%, as several research analysts predict, Spotify’s podcasting business likely would account for a small fraction of $100 billion.

Company officials also expect to rake in billions of dollars from audiobooks, but Spotify’s true opportunity in the space remains murky. Spotify is a late arrival to audiobooks, far behind industry leaders like Amazon-owned Audible and Sweden’s Storytel. While Ek predicted that the global audiobook business could reach $70 billion annually in the coming years, market researchers peg the total at significantly less than that.

Rather, Spotify’s biggest growth opportunities likely lie in as-yet-untapped markets, an outlook echoed Wednesday by Ek.

“We see the opportunity to continue to imagine and explore new verticals across our platform—within audio, but also beyond,” Ek said. “And for each vertical, we will develop a unique set of software, services, and products and business models that’s going to be tailored for that specific ecosystem.” 

Even if Spotify continues to grow at a rapid clip, much may still go wrong before 2030. Antitrust regulators could stifle vital acquisitions. The push for a decentralized internet could lessen the importance of large content platforms. Newer forms of media could make audio feel outdated.

For now, though, Spotify’s chief executive has no room for pessimism. At this point, blind optimism might be the only way to reach $100 billion.

Want to send thoughts or suggestions for Data Sheet? Drop me a line here.

Jacob Carpenter

NEWSWORTHY

Happy hunting. Twitter will give Elon Musk access to billions of tweets held internally by the company, a concession aimed at quelling the Tesla CEO’s complaints about bot accounts on the platform ahead of his planned $44 billion acquisition of the company, the Washington Post reported Wednesday. The data could help Musk discern whether Twitter’s statements about the prevalence of bot accounts on its site are accurate, a sticking point that Musk has cited in threatening to scuttle the deal. However, the information likely will not be enough for Musk to replicate Twitter’s calculations about bot prevalence.

Gamers on cloud nine. Microsoft’s Xbox TV app will debut June 30 on select Samsung televisions, allowing users to play Xbox video games without a console for the first time. Xbox Game Pass Ultimate subscribers will be able to play about 100 titles on Samsung’s 2022 smart televisions, taking advantage of Microsoft’s investment in cloud-based gaming. Microsoft officials said they hope to partner with other television manufacturers to offer the Xbox TV app, but the company hasn’t announced any immediate plans for expansion.

Time’s up. Meta has shelved its plans to develop a smartwatch with two embedded cameras, ending a two-year effort to compete with Apple and other companies developing similar wearables, Bloomberg reported. The Facebook parent hoped the second camera would allow users to take pictures with the watch, but engineers couldn’t marry the technology with other common smartwatch features. The decision comes as Meta aims to trim spending amid its costly push into metaverse-related technologies.

Slower in Shanghai. Internal records show Tesla expects to produce fewer vehicles at its Shanghai plant in the current quarter than originally projected, the result of COVID-related shutdowns that slowed manufacturing in the Chinese hub, Reuters reported Thursday. A production memo showed Tesla is on track to assemble about 115,300 vehicles in the second quarter, down from roughly 179,000 in the prior quarter. Tesla CEO Elon Musk had said in April that he expected Shanghai’s second-quarter production totals would closely mirror or possibly exceed its first-quarter output.

FOOD FOR THOUGHT

Ready to regulate. Holding your breath on Congress to act is never advisable—something Federal Trade Commission Chair Lina Khan knows all too well. The staunch Big Tech critic told Protocol she plans to move ahead with regulatory rulemaking on data privacy issues, refusing to wait around for Congress to pass similar legislation. Khan took particular aim at corporations collecting user data and selling it on the secondary market, arguing that the FTC can help curb the practice. Legislators are nearing an agreement on new data privacy laws that would further empower the FTC, but the prospects for passage are dwindling as midterms approach.

From the article:

Khan, who is coming up on the end of her first year in office, has long been preparing to write regulations that would ban the collection of certain kinds of data, as well as tackle algorithmic discrimination. She’s also complained repeatedly about behavioral advertising.

“We need to be very clear-eyed about the fact that the behavioral ad-based business model creates a certain set of incentives that are not always aligned with people’s privacy protections,” she said.

IN CASE YOU MISSED IT

Intel joins a rush of tech companies putting a freeze on hiring, as the chip industry faces a reset, by Nicholas Gordon

New Senate crypto bill is only the beginning for an industry seeking clarity, by Declan Harty

Terraform Labs facing embezzlement probe following TerraUSD collapse, by Oliver Knight and CoinDesk

Ford CEO promises he’s “not trolling” Musk by including chargers to help rescue dead Teslas on new electric pickup truck, by Sophie Mellor

Peptone, a startup using A.I. to find drugs for tricky “disordered” proteins, raises $40 million in venture funding, by Jeremy Kahn

Amazon’s new CEO talks Bezos, losing key executives, and Lord of the Rings, by Emily Chang, Matt Day, and Bloomberg

Alibaba is being sued for selling a 3D printer that caused a fire that killed a man, by Robert Burnson and Bloomberg

BEFORE YOU GO

Sure you didn’t mean $150? In the battle over working from home, Cathie Wood’s ARK Invest favors the rank-and-file. In a research piece published Wednesday, the investment firm predicted that managers demanding a full-time return to the office will lose that fight, with the hybrid model ultimately winning out. It’s why ARK Invest is placing a whopping $1,500 price target for 2026 on shares of Zoom, a 13-fold increase on its current price. Of course, Wood’s signature tech-heavy Innovation fund, in which Zoom is the largest holding, is down 66% from its 52-week high. The rest of Wall Street isn’t racing to Zoom on Wood’s word, either. Shares in the videoconferencing company were down 3% in midday trading Thursday.