Spotify’s chief financial officer, Barry McCarthy, took shots at the company’s competitors, argued for continued cooperation with major labels and revealed some telling data points during an interview at the Goldman Sachs 27th Annual Communacopia Conference on Friday.
The former Netflix CFO told attendees that Spotify has a 50 percent conversion rate of freemium users to its premium tier, granted that those listeners “stay engaged” with the streaming service. What constitutes an “engaged” free user isn’t entirely clear, though Spotify currently has 180 million monthly active users and 83 million premium subscribers spread out across 65 markets.
On Spotify’s rivals, McCarthy admitted Apple’s iPhone gave the hardware giant a “competitive advantage” but that his company was focusing on building out a “bigger ecosystem” overall by cultivating partnerships with a wide swath of tech companies, including Microsoft, Samsung and Google’s Android operating system, “and have our success across those platforms enable us to compete. If we do that well, I think our business will prosper. If we don’t? Roadkill.”
McCarthy also claimed another deep-pocketed rival, Amazon, isn’t too interested in making a good product with its Music Unlimited service, saying “they don’t really care how engaged you are in the music service as long as you become a Prime subscriber.” He added that “if all you care about is price and you don’t really care about the music, they probably look like a pretty good value proposition to you.”
Then, without naming names, McCarthy said it may be time to thin the herd in terms of smaller, independent streaming services. “It’s fair to say at this point, if you’re relatively small and under-capitalised, it’s kinda game over for you,” he said. “Even if you haven’t figured it out yet. It’s a scale business.”
During the interview, McCarthy described Spotify’s “co-dependent relationship” with the big three labels. “There are three labels who own most of the marketplace, and they have oligopoly power, and we can’t be successful without them as partners,” he said, adding that “we have driven all of their revenue growth, and they can’t be successful without us as business partners. It’s important for both of us that we never allow the relationship to become a zero-sum game.”
McCarthy also pushed back on the idea of raising subscription prices from the industry baseline of $9.99 per month. “They do want to see it grow, and I don’t,” he said of labels. “What you want is revenue to grow, and you should want our market share to grow.”