The Thesis
Spotify has evolved from a "Music Streaming Service" (with low margins) to an Audio Platform (with expanding margins).
By successfully expanding into Podcasts and Audiobooks, Spotify differentiated itself from Apple Music. They are now focusing on "Efficiency" (Gross Margin expansion), proving that the unit economics of audio are better than the market thought.
Product Deep Dive: Earshare
1. Music (The Anchor)
- The Product: 100M+ songs.
- The Economics: They pay ~70% of revenue to record labels (Universal, Sony). This is a fixed cost constraint.
- The Moat: Discovery Weeky / Spotify Wrapped. The personalization keeps users loyal.
2. Podcasts (Margin Expansion)
- The Product: Joe Rogan, Call Her Daddy.
- The Value: Unlike music, Spotify sells their own ads here (SPAN - Spotify Audience Network). They don't have to pay a "per stream" royalty to labels for podcasts.
- Video Podcasts: Competing directly with YouTube.
3. Audiobooks
- The Product: 15 hours of listening included in Premium.
- The Strategy: Attacking Amazon Audible's monopoly. It increases the value of the bundle, justifying price hikes.
The Business Model
- Two-Sided Marketplace: Marketplace tools let Labels/Artists pay Spotify to promote songs. This improves Gross Margins.