What began as a music-only streaming platform evolved into a broader audio platform that included podcasts and audiobooks. Now, Spotify is venturing into video — in both snippets and long-form content, although the latter is only in an experimental phase. repeatedly referred to “the Spotify Machine” when explaining the company’s expansion beyond music.
The machine helps increase engagement. Spotify is more valuable if people spend more time using it. When engagement increases, churn decreases, which in turn reduces the expense involved in bringing those lapsed customers back. When engagement increases, free users are more likely to become paid subscribers. The last thing a streaming service wants is an infrequent customer who doesn’t enjoy the features or delve deep into its content.
The machine gives users greater freedom of choice. Ek confirmed Spotify will have an audiobook-only subscription tier along with a music-only tier; the standard subscription tier offers both music and audiobooks. Over the years, Spotify has given consumers multiple options to choose from: an individual plan, a two-person plan called Duo, a multi-user family plan, and, in certain markets, the ability to purchase one day at a time.
The machine also requires a feat of engineering. “It’s a fairly complex machine,” Kung said, because Spotify has both variable-cost models, such as revenue sharing and per-hour royalties, and fixed-cost models — some in-house and licensed podcast content, perhaps. Ek added that “the machine takes care of all the complexity on the back end to deal with what was historically a very difficult problem to solve, which is multiple business models in one consumer experience.