Spotify Reports $100 Million In Royalty Savings Since Rolling Out Bundled Offerings Since March

Photo Credit: Daniel Ek by Stuart Isett / Fortune Brainstorm Tech / CC by 2.0

Spotify’s bundling pays off, but not for songwriters and publishers. The bundle move puts the company on course for its first full year as a profitable entity.Spotify posted a quarterly operating income of nearly half a billion dollars, at €454 million ($499 million), putting the company’s year-to-date operating profits for the first three quarters of 2024 at €888 million (about $975 million). That places the company firmly on course for its first full year of profitability.

“We’ve never been in a stronger position, thanks to the outstanding execution by our team. I’m incredibly proud of the way we’ve delivered and the progress we’ve made,” said Spotify founder and CEO Daniel Ek.

“We’re where we set out to be — if not a little further — and on a steady path toward achieving our long-term goals,” he added. “This relentless pursuit of innovation and commitment to growth sets us up to deliver the most valuable user experience in the industry, while reinforcing the core strengths that make Spotify unique. I am very excited about what lies ahead for us.”

That success is due in no small part of Spotify’s bundling over the past year. The music streaming giant’s global Premium Subscriber base grew to 252 million paying users in Q3. That’s up 12% year-over-year and up by 6 million net subscribers in the prior quarter.Spotify’s total global Monthly Active Users (MAUs) grew 11% year-over-year to 640 million in the third quarter, and by 2% (14 million) compared to the previous quarter. That’s over 1 million ahead of guidance.

Spotify reported its Premium subscriber growth translated into revenue of €3.516 billion ($3.861 billion) in Q3 “despite greater than anticipated headwinds from unfavorable currency movements.” Its Premium revenue was up 24% year-over-year.

Meanwhile, subscriber performance grew across all regions, with “outperformance” led by Europe with 38% and Latin America with 22%. Spotify saw 27% Premium subscriber growth in North America.

The company’s ad-supported revenue hit €472 million ($518.4 million) in Q3, up 7% year-over-year. Spotify noted it saw ad-revenue growth in a “challenging brand environment,” and its music advertising was driven by “growth in impressions sold, partially offset by softness in pricing.”

In August, Spotify moved to dismiss what it called a ‘nonsensical’ lawsuit over unpaid royalties filed by the Mechanical Licensing Collective. That lawsuit is still dragging out in court, so it will be interesting to see if this bundling strategy ultimately pays off for Spotify. It seems to be doing so—at the expense of songwriters and publishers who create the vast majority of the platform’s content.