Spotify's Never-Ending Struggle to Make a Profit

From Music to Podcasts to Audiobooks: Spotify's Losing Game

Spotify has revolutionized how we listen to music, but after nearly two decades, it still hasn’t turned a profit.

Every time it tries to fix this problem, it jumps into a new industry—podcasts, audiobooks, live audio, even car speakers. Each time, it fails to make a real impact and moves on to the next “big idea.”

So, what’s the issue? Why can’t Spotify make money, and why is its so-called “Grand Strategy” doomed to fail? Let’s break it down.

Spotify's Core Problem: A No-Win Business Model

At its heart, Spotify’s business is simple:
✅ Get millions of people to pay a monthly fee
✅ Use that money to pay artists and labels
✅ Keep whatever is left as profit

But here’s the catch—Spotify doesn’t control its biggest cost: music rights.

Just three record labels—Universal, Sony, and Warner—control 70% of the industry. They set the rules, and Spotify has no choice but to pay whatever they demand.

For every $1 Spotify makes, about 63 cents goes straight to the labels. That means Spotify is left with just pennies to cover everything else—marketing, staff, and technology.

This is very different from Netflix, which pays a fixed cost to produce a show. If millions of new people subscribe, Netflix makes money. But Spotify’s costs increase with every new user because it has to keep paying labels for every stream.

It’s a low-margin, high-risk business, and unless something changes, Spotify will never be as profitable as investors expect.

Why Can’t Spotify Just Raise Prices?

If Spotify is undercharging for music, why not increase prices? Simple—because of its contract with record labels.

• Spotify doesn’t pay per song or per user—it pays a percentage of its revenue to labels.
• If it raises prices, labels take most of the extra money—Spotify only keeps about 37 cents for every dollar it earns.
• That means Spotify gets all the customer backlash but only a small financial boost.

Apple, Amazon, and YouTube don’t have this problem because they don’t rely on music for profit. They use it to sell iPhones, ads, and Prime memberships. Spotify, on the other hand, only has music—and it’s stuck in a bad deal.

Jumping from One Failed Idea to the Next

Spotify knows it can’t win in the music industry alone, so it keeps trying to escape by expanding into new areas.

1. The Podcast Gamble (That Flopped)

Podcasts seemed like the perfect fix:
✅ No record labels demanding money
✅ High listener engagement
✅ Strong potential for ads

So, Spotify went all in, spending nearly $1 billion on exclusive podcast deals.

• Joe Rogan? $200 million.
• The Obamas? $25 million.
• Meghan Markle & Prince Harry? $20 million.

The result? Disaster.

• The Obamas left for Audible.
• Meghan & Harry’s podcast flopped.
• Joe Rogan is no longer exclusive to Spotify.
• Investors lost faith, and the stock price dropped.

Podcasts didn’t solve Spotify’s money problem. So, what’s next?

2. Audiobooks: Another Expensive Distraction

Spotify then pivoted to audiobooks, spending $125 million to buy an audiobook platform. The idea was:

1. Offer free audiobooks to Premium users (but only 15 hours).
2. Charge $12.99 for more listening time.
3. Hope people get hooked.

But there’s a big issue:
❌ Most audiobooks are 16-20 hours long. Imagine getting cut off before finishing your book.
❌ People don’t want to subscribe to Spotify for audiobooks. They already have Audible.
❌ This doesn’t solve the core problem—Spotify is still a middleman paying publishers.

Spotify has already cheapened music, making people expect every song ever for $10/month. Now, it’s doing the same thing to audiobooks—which will hurt the industry instead of helping it.

Spotify's So-Called "Grand Strategy" Is a Mess

Spotify tries to convince investors that all of these moves—music, podcasts, audiobooks, and even online courses—are part of a single, well-planned strategy.

The reality? It’s just jumping from one failing experiment to another.

1️⃣ It wastes millions trying to compete in new industries.
2️⃣ It fails to make real money.
3️⃣ It distracts investors by promising “the next big thing.”
4️⃣ It moves on to something else.

This cycle repeats over and over, and Spotify still isn’t profitable.

The Harsh Reality: Spotify Will Never Be as Profitable as Investors Want

Spotify doesn’t own music—labels do.
Spotify doesn’t own podcasts—creators do.
Spotify doesn’t own audiobooks—publishers do.

Unlike Apple, Amazon, or YouTube, Spotify doesn’t have another big product to make up for its losses. It has to figure out how to make money from audio alone.

So far, it hasn’t.

At some point, Spotify will have to face reality:
✅ It can raise prices slightly, but it won’t be enough.
✅ It can expand into new areas, but it doesn’t have a real advantage.
✅ It can keep distracting investors, but that won’t work forever.

The longer it avoids the truth, the bigger the crash will be when reality hits.

Spotify's Grand Plan Is Just an Illusion

Spotify keeps telling investors it has a master plan—a “Grand Strategy” to become the one-stop shop for audio.

But in reality, it’s just scrambling for any path to profitability.
It burns millions on failed ideas, annoys users, and still hasn’t figured out how to win.

At some point, the music will stop. Will Spotify find a way to survive, or is it just delaying the inevitable?

Let us know what you think! And for more insights on business and tech trends, stay tuned to WiKi TLDR!

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