Stream On 2023 and the New Battlefield for Spotify

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In front of hundreds of eyes, Daniel Ek stepped onto the stage, walking quickly but firm. The founder and CEO of Spotify looked casual, wearing a white T-shirt under a light grey shirt with two pockets.

He may look calm, but inside, I believe he might have felt nervous. And this is not for nothing.

It was Wednesday, March 8, 2023, at 9 a.m. in Los Angeles when Daniel opened the Spotify Stream On event, a conference first held two years ago. This year, Stream On became a grand event, inviting hundreds of guests from various backgrounds: company executives, content creators, and international journalists. The agenda was grande: announcing new features and changes to Spotify.

“These new changes mark the biggest shift in Spotify since we first appeared on mobile phones ten years ago,” Daniel said.

In the fast-paced and adaptive world of technology, changes and updates are a certainty. But the biggest change in a decade? That’s clearly a big deal. Especially for Spotify, the leader in global music streaming with 500 million monthly active users.

Before the Stream On 2023 event, many were guessing what was new at Spotify. Some features had already leaked on social media. Others speculated—while hoping—that Spotify would launch Spotify Hi-Fi, which had been discussed for several years. But the changes Daniel mentioned were indeed big—if not radical—for a music streaming platform.

That morning, Daniel invited several top Spotify executives to guide us, the audience in the room, into Spotify’s new era.

Beyond Music Streaming

One of the first things that grabbed attention at Stream On 2023 was Spotify’s new interface. Before this, there were two content options at the top left of Spotify: Music and Podcast & Show. Now there would be a third option: Audiobooks.

Not only that, Spotify was also giving more space to visuals, including motion pictures and videos. This was combined with a Preview feature, offering a few seconds’ glimpse to give users key insights into the content.

When I selected music content, for example, at the top there were several playlists made by Spotify, all aligned with the genres I typically listen to. Personalization is what makes Spotify stand out. Below the playlists, more music and playlist options appeared.

On my page—since it’s personalized, it differs for each user—I saw the playlist “90’s Rock Anthems.” There was a preview of five songs, accompanied by short videos. Users can choose if the content suits them. We can add it to our library, download it, share it, or give it a thumbs down if we’re not interested.

The same thing happens on the Podcast & Shows page. At the top, there’s a list of favorite or frequently listened-to podcasts. Scrolling down reveals more content recommendations. Since I often listen to content from Box2Box, their latest content was displayed for me, complete with a one-minute preview and a short video.

Scrolling down further, Spotify will give you more recommendations that match your habits and preferences.

When this interface was first introduced, there were mixed reactions as usual. Supporters found it refreshing and useful, giving users more choices and acting as a guide before consuming (and watching) content. This provides an efficient and effective experience for users.

Gustav Soderstrom, Chief Research & Development Officer and Co-President of Spotify, echoed this sentiment. According to him, the new Spotify was designed to make it easier for users to discover content. So, they focused on making the content search more efficient.

“Our goal isn’t to make users spend more time, but to save them time,” said Gustav.

The new interface and ways to find content were also supported by a mix of old features like Discover Weekly and Release Radar, with new features like Smart Shuffle and AI DJ. The AI DJ guides users and recommends songs that match their taste, including old favorites or new songs similar to them.

Critics, however, argue that Spotify has joined the trend of "TikTok-ification." This term refers to platforms that focus on short, vertical videos heavily driven by algorithms.

Instagram and YouTube had already entered this space with Reels and Shorts. In 2022, Adam Mosseri, Head of Instagram, stated they were focusing on videos and Reels. Now, Spotify is entering the same arena.

They have introduced Spotify Clips, 30-second videos for artists to tell stories. Spotify is also gradually offering video podcasts—first introduced in 2022—which is expected to grow further soon.

In my opinion, Stream On was Spotify’s way of officially declaring that they have moved beyond being just a music streaming platform—a shift Daniel already hinted at in 2019 when he said that audio content was the future of Spotify. They are transitioning into a content platform. Music will remain a key product, revenue stream, and cost for Spotify, but they are expanding further.

They realize that the music streaming space has become too narrow for a company with a Swedish mentality, especially in the vast world of technology. Spotify has decided to step out and compete in a new battlefield.

This shift is reflected in their focus on podcasts, which they call the “primary expansion outside music,” and now they’re venturing into audiobooks. Their moves have been carefully planned over the past several years. Spotify has been aggressively expanding into podcasts, collaborating with podcasters and acquiring numerous podcast-related companies.

Julie McNamara, Spotify’s VP and Head of Global Podcast Studio, said they believe they can revolutionize the podcast industry, just as they did with music. According to her, five years ago, the podcast industry was stagnant, with low ad spending, and Spotify had only a small share in the market.

Spotify began by acquiring many companies related to podcast infrastructure, creating a solid foundation for their presence in podcasts.

In 2020, they purchased Megaphone, a podcast marketing company, for $235 million—their largest acquisition to date. Before that, they had acquired Anchor, a podcast creation company, for $154 million. Anchor has since become Spotify for Podcasters.

Once the infrastructure was in place, Spotify moved into content. In early 2022, for instance, Spotify struck a deal with Joe Rogan, a podcaster known for his sports-related content, estimated at $200 million. Spotify had also acquired two content companies: Gimlet (in 2014, for around $194 million) and The Ringer (in 2016, for $196 million).

Today, Spotify is considered a major player in the podcast industry, with more than 5.5 million podcasts. In 2021, they earned about $215 million from podcasts, a figure that grew by more than 300 percent. They are increasingly working with podcasters through Spotify Originals and Spotify Exclusives and expanding into video podcasts. As of now, around 70,000 podcasters use the video podcast format.

It’s worth noting that the podcast industry is still searching for its best format, and this includes Spotify. According to Forbes, Spotify has invested more than $1 billion in podcasts and still treats podcasts as an investment rather than a primary revenue source. They estimate their podcast growth will become evident in five years, with a gross margin prediction of up to 50 percent.

Daniel was right. Spotify has officially moved beyond being just a music streaming platform. They will continue to focus on audio as the foundation of their business, but not just music.

“In the past, you thought Spotify was the best place to listen (to music). But now, this evolution makes Spotify much more engaging and exciting,” Daniel said.

Money for (Not) Nothing

Alex Norstrom, Co-President and Chief Business Officer, concluded his presentation on content monetization for creators by explaining one of Spotify’s core principles.

“As you’ve seen, we provide creators with the best resources to engage with their fans. We’re continuously working to create new opportunities for further monetizing content. In short, for creators: your success is our success too. This principle may often be overused, but we truly live by it. It inspires us and will continue to guide us in the future.”

At Stream On 2023, Spotify introduced new ways for creators to monetize their content.

In the podcast space, Spotify is positioning Spotify for Podcasters as the epicenter. Here, podcasters will get the latest features, including video podcasting, polls, and subscriptions.

In general, there are two ways to monetize podcasts on the new Spotify: ads and fan support.

There are two types of ads: Ambassador Ads and Automated Ads. The former involves hosts promoting Spotify for Podcasters to listeners. Automated Ads are third-party ads delivered through Spotify Audience Network (SPAN). As the name suggests, these ads are automatically inserted during ad breaks. Currently, these ad formats are available only in the United States but will roll out to other countries soon.

Fan support includes subscription models, available in 34 regions since 2021, and monthly listener donations, which are currently only available in the United States.

In the music space, aside from royalties (which always spark long debates among musicians and industry players), Spotify is maximizing the use of its Concert and Merchandise Discovery feature. Simply put, it’s a marketplace for musicians to sell merchandise and update concert or tour dates on their Spotify page.

This feature has been in use since 2021 but will be optimized this year to better serve artists.

What’s Next?

Are these big changes at Spotify good or bad?

All disruptions shake up the status quo, and there’s always a fight involved. In this case, Spotify will inevitably go head-to-head with established platforms.

For instance, the decision to enter the video podcast space will likely put Spotify in competition with YouTube, the biggest player in video sharing. For merchandise, Spotify could be up against platforms like Bandcamp or even independent e-commerce sites. And in the future, if Spotify starts selling concert tickets, they might have to face giants like Live Nation Entertainment.

During a fireside chat with Jeremy Erlich, Global Head of Music Content, I asked about the possibility of these direct confrontations. Jeremy diplomatically responded that they’re not focused on that.

"Our philosophy is not to jump into a pond and take a part of what already exists, but to enter the pond and help it grow," he said.

In the end, I think these changes aren't about being good or bad. They are necessary.

As the leader in the music streaming service industry, Spotify must move forward. They were one of the companies that revolutionized the music industry 17 years ago, and they've grown to control more than 30 percent of the market.

At this point, change is inevitable for Spotify.

Just like Daniel Ek said in his closing speech at Stream On 2023:

"At Spotify, the only constant is change." []