Daniel Ek calls podcasts a $20 billion opportunity for Spotify – now they’re after audiobooks
Ek believes Spotify can generate USD 100 billion in revenue annually within the next decade.
Image: Drew Angerer / Getty Images
Spotify CEO Daniel Ek has called podcasts a $20 billion opportunity for the platform, as Spotify informed investors that the vertical brought in $215 million in revenue last year.
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In pre-prepared remarks posted on Spotify’s website ahead of their 2022 Investor Day, Ek admitted that while the platform’s investments into podcasting have set it back on its target of a 30% to 35% gross margin, he believes it has a “40 to 50% gross margin potential”.
Ek also added that the ‘Spotify Machine’ will “keep on adding more verticals over time and expanding our business models to allow for more types of content and let artists and creators monetise them,” specifically highlighting the platform’s move into the audiobook market.
Explaining that the global size of the book market is estimated to be around $140 billion, Ek pointed out that audiobooks only represent 6-7% market share of the value, but in the most penetrated audiobook markets, audiobooks are closer to 50% of the market value. “Call that an annual opportunity of $70 billion dollars for us to expand and eventually compete for,” Ek wrote, promising Spotify would “play to win” and become the major player dominating the space.
“While it’s still early, we expect audiobooks to also have healthy margins, above 40% and be highly accretive to the business,” Ek concluded, adding that the company would incorporate popular Spotify features like personalisation for its audiobooks.
Ek also revealed that the company was on course to achieve a user base of one billion listeners, citing 85% retention rate from existing customers coupled with the doubling of new customers from Q4 2021 to Q1 2022. This has led to Spotify posting Q1 2022 revenue that is up 224% year over year while boasting a decline in subscriber churn [or turnover] rate of 30% over the last four years.
The Spotify CEO concluded with a plea to investors to bet on Spotify, claiming he believes in the next decade, the platform can generate $100 billion in revenue annually with a 40% gross margin and a 20% operating margin.
Spotify has also reportedly been testing an NFT gallery function for artist pages on a limited number of Android devices in the US. The NFTs pictured in the gallery can be enlarged by tapping on them, which also brings up a ‘See More’ option that takes the user to the NFT’s listing on NFT platform OpenSea – though it must be noted that Spotify is currently not taking a commission for sales that may result from the gallery feature.