Can Spotify Achieve Profitability In 2024?

For a company that has never made an annual profit and accumulated losses of over $4 billion over the years, we dive into the details to decode whether Spotify’s latest moves — layoffs, podcast cuts, trimmed operational costs and raised subscription prices — can finally lead to an ecosystem in which the streaming market leader can be profitable.

In our latest DMN Pro Weekly research report, we take a closer look at the prospects of Spotify becoming profitable in 2024 and beyond.

Report Table of Contents

Scale vs. Profitability: Spotify’s Empty Pockets

Higher interest rates have helped to shift the emphasis on Wall Street (and among investors) from growth towards profitability. Over the years, however, profitability simply hasn’t been on the cards for the streaming market leader. The company has posted a positive net income for only a couple of quarters over the last several years — crossing the $100 million mark only once.

Table 1: Spotify quarterly net income/operating loss 2020-2023

Business Model: Buried In Variable Costs

Spotify has to pay a revenue percentage — often over 70% — to rights owners in exchange for licenses. A quick overview of how Spotify royalties work, and why variable cost increases make scaling towards profitability more difficult.

Figure 1: The ‘big pot’ for sound royalties

Figure 2: The ‘big pot’ for composition/song royalties

Raising Subscription Prices and Cutting Costs: Spotify Moves

Music licensing is expensive. But Spotify is also attacking the other side of the problem: exceptionally high operating costs. Recent moves include subleasing its pricey 14-floor office space in Manhattan, downsizing with several rounds of layoffs, and axing way-too-expensive podcasters.

Can Spotify Become Profitable In 2024?

With all the changes Spotify has implemented between 2021 and 2023, 2024 could become a very different playing field for the consistently unprofitable streaming market leader.

Figure 3: (NYSE: SPOT) in 2023 — up 240%