Spotify is hoping some exclusive pilates classes will make more people splurge on premium subscriptions.
What happened: Spotify is partnering with Peloton to launch a new fitness hub for premium subscribers that will include over 1,400 guided workout classes and exclusive content from wellness creators.
For the struggling Peloton — which has seen its stock sink ~96% since its 2021 peak — the tie-up will put its digital products in front of millions of new potential customers.
Meanwhile, Spotify is looking to position itself as more of an everything app for all kinds of media rather than just a music and podcast platform. It’s recently added a DM-style messaging feature to the app, a vertical video feed, and even a marketplace to buy physical books.
Why it’s happening: The music streaming business model isn’t great as a standalone product. Regardless of how many people listen, Spotify is still paying over 70% of its revenue to artists and labels in royalties. Expanding the perks of its paid subscriptions beyond audio could help grow the part of its business that actually turns a profit.
Since every additional stream triggers the same payout to rightsholders, growth doesn’t meaningfully improve profit margins. The real money comes from converting free listeners (about 61% of its users) into lifelong, paid subscribers.
Bottom line: Unlike video streaming services like Netflix or Disney+, which actually offer different content than each other, music streamers are all selling the same catalogue of music at roughly the same price. Carving out a niche in fitness could be Spotify’s first step towards offering something truly different than its competitors.—LA
