I know this might sound a bit ironic coming from someone who’s always online, but here’s your friendly reminder to unplug and enjoy activities that aren’t digitally charged. Lately, I’ve been diving into Children of Virtue and Vengeance by Tomi Adeyemi, and it’s been such a refreshing escape from reality.
A peek into today’s edition:
- Spotify‘s road to success
- Tech Byte: new Kendrick Lamar experience on Apple Vision Pro
- Big Tech earnings highlights
How Spotify’s Profit Pivot Transformed Its Future
Spotify is gearing up for one of its most crucial earnings calls yet. On Feb. 4, the streaming giant will reveal its Q4 2024 results and confirm whether it achieved its first full year of profitability—a major milestone in its history.
The audio streamer recently secured a multi-year publishing agreement with Universal Music Group ahead of its next earnings call, opening up more opportunities for artists, creators, and consumers. Through the deal, UMG — which includes artists like Billie Eilish, Taylor Swift, Ariana Grande, Bad Bunny, Post Malone, and Kendrick Lamar under its umbrella — and Spotify will work together to evolve the platform’s features by introducing new paid subscription tiers and bundle deals, providing higher-quality audio and visual content, and more. The new publishing deal establishes a direct license between Spotify and UMG as the streamer works to elevate its offerings to compete with other platforms like Apple Music, which includes boosting its average payout rates to artists.
Speaking of payouts, Spotify reported that it paid out a record $10 billion to the music industry in 2024, bringing its total payouts since its launch in 2006 to nearly $60 billion. The company said that over 10,000 artists generate more than $100,000 annually each from Spotify alone. This is significant progress compared to 2014, when only about 10,000 artists made at least $10,000 annually on Spotify.
With its stock currently hovering around $550 a share, all eyes are on the upcoming earnings report to see if this winning streak continues. Let’s take a look at how Spotify got here.
Turning a Profit
For the first time in its history, Spotify is on the verge of reporting a full year of profitability — a massive shift for a company that spent years prioritizing growth over turning a profit. Since its launch, Spotify has operated on a high-investment model, pouring billions into content licensing, podcast acquisitions, product innovation, and market expansion. That approach helped it dominate the streaming space, but it also meant the company consistently ran at a loss, relying on investor confidence and steady subscriber growth to sustain operations.
After reporting its first quarter of profitability in Q1 of 2024, Spotify shifted to a more sustainable business model to drive consistent revenue growth. The company has made a hard pivot toward profitability by increasing subscription prices, cutting costs, better monetizing its vast user base, and focusing on more sustainable revenue streams. If Q4 2024 numbers confirm another profitable quarter, it will mark Spotify’s first full year in the black — proving that its business model can be both dominant and financially sustainable.
Spotify has had some serious momentum on the stock market since first turning a profit last year, signaling a significant shift in how investors view the company’s long-term potential. Spotify’s stock surged 138% last year alone, outpacing the broader market and cementing its best year yet on Wall Street. This comes as Spotify finally eclipsed the $100 billion market cap threshold for the first time in December 2024, on the same day it launched its annual Wrapped experience. The year-end feature has become a cultural phenomenon, driving record engagement and a surge in new sign-ups, something investors clearly noted.
With its first full year of profitability in sight, Spotify’s stock continues to climb, which rose as high as $560 on Friday — more than double the $217 range it hovered around this time last year.
The Road to Success
Spotify’s path to profitability hasn’t just been about cutting costs; it’s been about doubling down on what makes the platform sticky. Personalization is a huge part of that, with AI-driven recommendations, curated playlists, and features like AI DJ and Wrapped keeping users engaged year-round. The free, ad-supported tier has also been a key growth engine, acting as a gateway for paid subscriptions — more than 60% of Spotify Premium subscribers started out on the free plan.
As of the third quarter of 2024, the streamer reported having 252 million premium subscribers worldwide, up 12% from 226 million in the corresponding quarter of 2023. Analysts are optimistic about the company’s 2025 potential, predicting 13% revenue growth and 23 million new premium subscribers.
Beyond that, Spotify has made big bets on global expansion, proving that markets once seen as challenging to monetize — like India, Brazil, Mexico, and Nigeria — can drive real revenue with the proper pricing and long-term investment. By meeting users where they are, both in content and cost, Spotify has built a streaming ecosystem that keeps growing while finally becoming financially sustainable.
So, how did Spotify crack the code?
A big part of Spotify’s growth strategy is expanding beyond its core offerings of music and podcasts to create a more diverse, all-encompassing platform. Over the past year, the company has been experimenting with self-help wellness and educational content, forging partnerships with brands like Adidas to bring new experiences to users. This shift opens up new revenue streams, positioning Spotify as a go-to platform for various forms of media. The platform also recently integrated video content into its platform, expanding access to a broader range of experiences.
Spotify’s push into non-music content is about meeting users where they are, with tailored experiences that align with their interests outside of traditional entertainment. While music remains Spotify’s main attraction, it’s no longer the only draw for users. I think Spotify CEO Daniel Ek made the right call in 2018 by betting big on podcasting, but while his promise to invest $500 million initially — and later upping it to $1 billion — was bold, it may not have been the most sustainable approach.
Spotify quickly spent its initial podcasting investment to acquire the exclusive rights to high-profile shows. In 2020, the streamer secured an exclusive deal for The Joe Rogan Experience podcast, reportedly worth over $100 million, later followed by a $60+ million deal to stream the Call Her Daddy podcast exclusively. These moves helped establish Spotify in the podcasting space, but much about that industry has changed since. As the podcasting landscape evolved, Spotify pivoted its approach to become more financially sustainable by scaling back its extravagant spending and setting its sights on new goals.
Spotify’s been playing the long game, and this earnings call could be the moment it all pays off—literally. With a more substantial business model, big-money deals, and a constantly evolving platform, the streamer proves it can be both profitable and innovative.
Now, the real question is: Can Spotify keep the hits coming in 2025?
Tech Byte
Synth Riders, the popular audiovisual rhythm game on Apple Arcade, is launching an exclusive Vision Pro experience on Feb. 6 to celebrate Kendrick Lamar‘s performance during Super Bowl LIX. HUMBLE. – The Synth Riders Experience will immerse players in a musical journey from New Orleans to LA. This is just one example of how Apple is extending Lamar’s performance beyond the Apple Music Halftime Show stage.
This Week in Tech
- Meta and Microsoft exceeded earnings expectations, posting revenue of $48.39 billion and $69.63 billion, respectively. Meta’s Reality Labs, the division behind the Quest headsets and Ray-Ban Meta Smart Glasses, reported a $4.97 billion operating loss as Meta chief Mark Zuckerberg reiterated the company’s plans to spend billions on AI infrastructure this year. Meanwhile, Microsoft’s stock dipped after Azure cloud growth fell just short of projections.
- China-based AI startup DeepSeek shook up the US tech market this week after its cost-efficient AI assistant and ChatGPT competitor quickly became the No. 1 free app on iOS and Android devices, sending Nvidia’s stock tumbling and triggering a broader AI-related stock sell-off. DeepSeek still maintained the top spot across app stores after being hit with a cyberattack earlier this week that prompted it to temporarily limit new user registrations. The US Navy has since banned DeepSeek due to “potential security and ethical concerns.”
- While DeepSeek was plotting its takeover this week, OpenAI launched ChatGPT Gov, a tailored version of its AI chatbot designed for US government agencies. The new product enables secure access to AI tools through Microsoft Azure’s commercial and government cloud environments.
- Major League Soccer (MLS) kicks off its historic 30th season on Apple TV with an expanded MLS Season Pass, now available in over 100 countries. This season introduces Sunday Night Soccer, a new primetime showcase streaming free for Apple TV+ subscribers. MLS also strengthened its reach with expanded partnerships with Comcast and DirecTV, while T-Mobile customers will receive complimentary subscriptions.
- Apple’s latest iOS software update automatically activates Apple Intelligence across iPhones, iPads, and Macs, though users can disable it in settings. As Apple expands its AI initiative, its full suite of features remains in beta.
Michelai’s Bet of the Week
OpenAI and Microsoft are investigating whether DeepSeek illegally leveraged OpenAI’s models to train its own chatbot, focusing on potential unauthorized data collection from OpenAI’s API. The situation is layered with irony, as OpenAI itself has faced accusations of using copyrighted content without permission to train ChatGPT.
I’m going to bet that DeepSeek didn’t steal OpenAI’s data, and even if it did, we won’t get concrete evidence to prove it.
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