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Taking a look at their most recent financial statement we can do some quick calculations. (All figures in million euros) Revenue Cost o

by robkop 6y ago

Taking a look at their most recent financial statement we can do some quick calculations. (All figures in million euros) Revenue Cost of Revenue Profit Premium : 7135 5126 2009 Free (ads): 745 739 6 Overall : 7880 5865 2015 Now currently the claim is that they are paying out $0.0038 per stream and we want to raise that to $0.01 which would be a 2.63 multiple. For spotify free that would mean that they just have to include 2.63x more ads, this is doable but I'm sure it would hurt adoption and maybe people would move from the platform. For spotify paid they could cut down their profit margin and pay 39% more per stream than they currently do (ignoring that they have more than 2B eur in other business expenses currently). But even after that they would still have to raise their prices by a multiple of 1.91. This would mean they would have to charge about $19.10 a month to not loose money on licencing in the US market.

nindalf 6y ago
This is good analysis. Small quibble with the last part - we don't know how much the price charged to consumers needs to increase to be able to afford $0.01 a stream. Any increase in price will see a drop in subscribers, dropping revenue. An increase in price could reduce revenue, making it harder to afford the increased payout.
- rsstack 6y ago
  Since the cost is linear to number of streams, it only matters if the premium subscribers that drop have a lower average streams/month rate than the average premium subscribers. This assumes, like the post two levels above me, that Spotify don't need the profits for anything and just need to break even.
- FalconSensei 6y ago
  On the other hand, when you think about take-home pay for the artists, more people listening, even if paying less for individual streams, can mean more money. Isn't one of the strengths of the internet the fact that it's easier to scale and reach a wider audience, thus having more money in the end?

by robkop 6y ago

nindalf 6y ago

This is good analysis. Small quibble with the last part - we don't know how much the price charged to consumers needs to increase to be able to afford $0.01 a stream. Any increase in price will see a drop in subscribers, dropping revenue. An increase in price could reduce revenue, making it harder to afford the increased payout.

rsstack 6y ago
Since the cost is linear to number of streams, it only matters if the premium subscribers that drop have a lower average streams/month rate than the average premium subscribers. This assumes, like the post two levels above me, that Spotify don't need the profits for anything and just need to break even.
FalconSensei 6y ago
On the other hand, when you think about take-home pay for the artists, more people listening, even if paying less for individual streams, can mean more money. Isn't one of the strengths of the internet the fact that it's easier to scale and reach a wider audience, thus having more money in the end?