Spotify, the world’s leading music streaming company, made a foray into the Indian market in February 2019 and recently revealed its financial performance for the first full year: FY20. The Indian entity of the Stockholm-based company recorded Rs 16.12 crore in operating income during the fiscal year ending March 2020.
Spotify India makes money from subscriptions and advertising. Subscription income contributed about 65% ~ Rs 9.75 crore ~ to the total turnover for fiscal year 20.
The India-based entity also made Rs 6.37 crore from the advertising. It was barely operational for a few months in FY19 and the company’s turnover was Rs 34.24 lakh. If we compare this with FY20, its income jumped 47X.
Marketing Driven Spotify India’s Growth In FY2020
To grow its user base in India, the company has spent a lot on marketing and branding, which is obviously visible from its spending model. This spent 88.24% of its total expenditure ~ Rs 159.69 crore on advertising and marketing in FY20.
As a perspective, Spotify India had 32 million downloads in FY20, according to Sensor Tower data. This was 8.5 times higher than its number of downloads in FY19, when the company wasn’t focusing much on India.
Besides advertising and promotion costs, Spotify India spent Rs 12.44 crore on employee benefits. This is largely the salary and other compensation costs incurred by the local team. Compared to FY19 when the company spent Rs 6.42 crore on employee benefits, that cost jumped 1.8 times in FY20.
Spotify India recorded a total expenditure of Rs 172.58 crore in FY20. However, it is not clear whether the expenses include payments to copyright holders and record companies. Coach sent requests to Spotify India to find out more about the breakdown of their spending. We will update the story as the company responds.
Overall, Spotify provides this breakdown separately, but it is not clear if this is the same in the Indian context as well.
Spotify India’s losses jumped 3.6 times to Rs 156.46 crore in FY20, from Rs 44.25 crore in the previous fiscal year. At the unit level, the company spent 9 rupees to earn one rupee in fiscal year 20.
Spotify India’s growth engine and competition
Media and entertainment, technology, and consumer goods companies were behind its ad revenue, according to Spotify. At the start of the current fiscal year (FY22), the company said it was working with more than 100 brands.
The company is likely to introduce its self-service Ad Studio platform and podcast advertising technology called Streaming Ad Insertion (SAI) in India to increase existing advertising revenue.
As the pandemic has disrupted businesses across all industries, edtech, video, and music streaming have seen a surge in their usage and engagement. With the increase in consumption, music streaming platforms are expected to post improved financial results in fiscal years 21 and 22.
That said, local platform Gaana’s results for fiscal year 21 showed no revenue growth. According to Fintrackr, its operating income growth remained almost stable in FY21 as it only increased by 2.65% to Rs 123 crore from Rs 120 crore during the exercise 20.
He cut losses to Rs 327 crore in FY21 from Rs 352 crore in FY20. Besides Gaana, Spotify competes with Jio-Saavn, Wynk, Hungama, among others.