Spotify has become a major force in the music industry in less than a decade.
Just like Netflix (NFLX) is shaking up the traditional pay-TV world, the music streaming service is the catalyst behind the internet-driven evolution of the music industry, said Mary Meeker, a venture capitalist with Kleiner Perkins Caufield & Byers, at Recode's Code Conference in Rancho Palos Verdes, Calif. on Wednesday. Meeker came prepared with fresh data on Spotify's growing dominance as part of her closely watched annual internet trends report, which was released in the afternoon.
As Spotify's paid subscriber numbers continue to grow (they already reached 50 million in March), so has its dominance of the music industry: Spotify now comprises 20% of global music industry revenues, up from nothing in 2008, Meeker noted. On top of that, Spotify has grown from scratch to 126 million monthly active users in just nine years -- not bad for a private company.
And according to Meeker, Spotify is actually helping the music industry. Recorded music revenue rose 11% in 2016 after seeing a 4% decline in annual average growth for the 16 previous years. About 52% of those revenues now come from subscription and streaming services, while physical sales (i.e. LP/EPs, vinyls, etc.) account for significantly less than that. Subscription music services such as Spotify and Apple's (AAPL) Apple Music are two significant forces driving growth in the recorded music industry recently, and the companies are poised to continue doing so.
"[Media companies like Spotify] speak to the power of the algorithms and the data," Meeker said in an interview with the Financial Times. "It improves pricing for users and consumer satisfaction."
Streaming services are expected to help music industry revenues double to $104 billion by 2030, Goldman Sachs estimates.
