· By Matej Harangozo


So Spotify in 2020 lost the equivalent of two point two million dollars per day, in marketing costs over a billion for the whole year. And they had a bigger loss overall for the company than they did in 2019. But their stock price still tripled in 2020 during the pandemic. For all the YouTube watchers, thank you so much for watching. Is your first time watching, please hit the subscribe button, hit that notification button. Let me know in the comments what you think about this particular topic that I'm about to break down. Obviously, you have to watch the video and also let me know in the comments what other topics would you like me to cover so I can help you guys enjoy your careers. And if you help me with comment on the video, liking it, as long as you like hey, hit that dislike button, if you don't like it, I don't really care.

Let me know your opinions. Give me your feedback. But if you help me grow this channel, it helps me to get more resources, hire more people. Do these videos potentially even three times a day, which is going to help you guys get your careers and understand the music business a lot better or just any business. So thanks again for watching. And let's get into today's topic. What's going on, guys. My name is Matej. Another day for Music Biz Daily. So let's kind of break this article down about Spotify and kind of what's going on here, right.

Let me first start with the point of how much money Spotify is spending for marketing. I'm going do another video tomorrow talking about how much they grew in terms of subscriptions and where in the world they grew the most and so on and so forth. But I've talked about this many, many times, basically saying that even if Coca-Cola was to stop advertising today as big and giant of a company as they are. Somewhere around two to three years, maybe even sooner. But, you know, because they're such a giant company, probably two years afterwards, Coca-Cola would not even be in the conversation of most consumers. Somebody else will take over, probably be Pepsi or any other brand that is competitive of Coca-Cola today that owns that, you know, small market share of the industry will just rise and take over.

Apple has done it famously, right. Apple in like the, you know, mid 90s, they might have had, like, I don't know, maybe 10 percent of the market share in terms of creating computers, home computers, laptops and things like that. Well look at them today. They took over Microsoft, which used to be the giant through marketing, through better technology, all of that. So going back to the Spotify point, if they didn't market as much as they would, they would not pretty much control a third of the market share in the US for streaming. You know, Apple Music and Amazon music are the two of the thirds and then like a 10 percent of share by Tidal, Pandora, all those other guys, you know, in terms of streaming companies.

But if they didn't advertise, they would not control that much of the market. They would not have the most subscribers for a streaming platform on this planet compared to their competitors. And Spotify wouldn't be what it is despite their losses, right. So let me first get to that. Talking about that marketing aspect, because I'll tell you guys all the time, even the big stars, yes, a decent portion of their kind of consumption of their content, streaming shows and all that comes from what they have built to this point. But they still wouldn't advertise. Now, there are at different levels of the advertise different ways they may not be running Facebook and Instagram ads, but they spend millions on advertising.

If they wouldn't continue to advertise. Their name will eventually fizzle out. So that's the first thing. Second thing is this kind of break down these numbers in terms of why Spotify is in such losses. You know, I'm saying so last year, you know, their operating losses were three hundred and thirty five million dollars for 2020, which were more than four times that were that they did on operating losses in 2013. And pre-tax was eight hundred and ten million dollars in losses. Now there's tax breaks and all that. I don't want to get into the discussion on tax breaks and how gross vs. net ends up being. But basically, despite that, their revenue has increased by 16 percent in 2020 compared to 2019.

Another point I want to make, and this is how a lot of artists, even businesses, get sort of tricked, scammed or bamboozled by a lot of these marketers when the marketers are like, man, I'm going to teach you a method that helped my company grow to a two million dollar company last year in revenue. OK, great. But how much did it cost you to make two million in revenue? Because if it cost you two point eight million dollars in advertising and spending to earn two more, you know, two million in revenue, you have eight hundred thousand dollar loss. Look, which is OK for a grown company, especially if they have, you know, a projection in the future, they're going to be able to, you know, monetize all the subscribers they're building into real revenue and things like that.

But a lot of marketers do that. You know, they show you these Facebook snapshots of how much money in their column, you know, where the pixel converts return of investment when the pixel like, shows them how much revenue was made. A lot of times they're not showing you how much was spent or they're not showing you how much else, how many other dollars were spent in other platforms other than Facebook that helped them to get to that , what looks like on the first glance, a positive revenue, meaning they made some profit. But really it's a negative revenue. It’s the biggest trick in the world.

But, you know, to Spotify point, again, going back to why Spotify lost money and invested so much is because they're in the growth stage. And guess what, you know, Daniel Ek, the CEO of Spotify, that's exactly what his reply was, you know, to all the journalism, the press out there that, look, we're in the growth stage like, come on, this is expected. This is what you do. You invest into the company big time. You know, sometime you spend triple than what you make if you have the investors to afford it. And with their stock price tripling for last year, they have the investors to do it.

But that's only going to, say last for so long. His article also goes into. Basically saying, how long is Spotify going to have the luxury to continue to spend a billion dollars a year in operations and have, you know, losses like that have been reported because they had been reporting losses. I've made a lot of videos about this. You know, there's a lot of different reasons why this marketing cause and the operations cause a lot. They being squeezed by the major labels for the licensing cause, because if you remember Universal Warner Brothers, they get paid differently by Spotify than what you get paid through distrokid, cd baby, united masters or whatever they have different license agreement.

Because they got bigger, bigger leverage. But there's a lot of different factors for it. But that is a good question. How long will Spotify get to continue to operate as a net in gross loss year after year until the shareholders put enough pressure on them to say, look, man, you all got to start making some profit now. You know, but obviously there they have to hands a lot of things their growing and increasing their podcast division. Joe Rogan is a perfect example for you guys. That's probably the only podcast that I listen to Joe Rogan's podcast. And if you notice, all of this content was sort of pulled from YouTube, the full shows. Now he's only allowed to play snippets. All the full content is now on Spotify. So they're making big major moves to create an identity for Spotify.

So it's not just the music streaming platform, which is the same as every other one out there. Apple Music, Amazon Music, Pandora, Tidal, Google Play and all. They all got the same catalogues of artists. However, they need to figure out how they were going to be exclusive. But anyways, that is a question. How long will they be allowed to continue to operate in the net loss? For how long before their share price goes down or the investors start pulling out? But look, in Technology Companies, this is a common thing. You know, Facebook had losses for a long time before they were profitable as well.

You know, even before they went public, millions and millions and millions, if not close to a billion dollars has been invested in Facebook before they even went public. And that was all sort of investment. So it was operating laws before they went public and then finally, you know, introduced their advertising platform, all that. So really where the money is, is in the subscribers. The problem for Spotify is that they offer a free version. But I'm going to make a video two days from now talking about the first country where they just launched Spotify, that they're not allowing any free accounts, only subscribers. So I will leave you with that. I don't want to make this too long.

Always in the comments, let me know what you guys think about Spotify constantly making the laws even though they made, you know, I'm saying they tripled their stock price last year. Show this video, whoever wants to see it. If you guys need to know what me and my company do link in the [bio] or link in the description below, depending on where you're watching this. And as always, I will see you guys tomorrow for another video in the MusicBizDaily.

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