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The top comment used https://www.statista.com/statistics/370618/spotifys-cost-of-goods-sold-share https://www.statista.com/statistics/370618/spotifys-cost-of-..

by lrem 5y ago

The top comment used https://www.statista.com/statistics/370618/spotifys-cost-of-goods-sold-share https://www.statista.com/statistics/370618/spotifys-cost-of-... as the source for the claim. Do you have anything else than "because I said no"?

jbverschoor 5y ago
Because I said no.. and because I read the financial statement. The spotify Q1 financial statement https://investors.spotify.com/financials/default.aspx https://investors.spotify.com/financials/default.aspx https://s22.q4cdn.com/540910603/files/doc_financials/2021/q1/f3a5d6f7-4036-4117-9913-c35194e1371a.pdf https://s22.q4cdn.com/540910603/files/doc_financials/2021/q1... Page 4: > Revenue 2,147 1,848 > Cost of revenue 1,599 1,376 So 74%, but cost of revenue is: Page 32: Cost of Revenue =============== > Cost of revenue consists predominantly of royalty and distribution costs related to content streaming. We incur royalty costs, which we pay to certain record labels, music publishers, and other rights holders, for the right to stream music to our users. Royalties are typically calculated monthly based on the combination of a number of different elements. Generally, Premium Service royalties are based on the greater of a percentage of revenue and a per user amount. Royalties for the Ad-Supported Service are typically a percentage of relevant revenue, although certain agreements are based on the greater of a percentage of relevant revenue and an amount for each time a sound recording and musical composition is streamed. We have negotiated lower per user amounts for our lower priced subscription plans such as Family Plan, Duo Plan, and Student Plan users. In our agreements with certain record labels, the percentage of revenue used in the calculation of royalties is generally dependent upon certain targets being met. The targets can include such measures as the number of Premium Subscribers, the ratio of Ad-Supported Users to Premium Subscribers, and/or the rates of Premium Subscriber churn. In addition, royalty rates vary by country. Some of our royalty agreements require that royalty costs be paid in advance or are subject to minimum guaranteed amounts. For the majority of royalty agreements, incremental costs incurred due to un-recouped advances and minimum guarantees have not been significant to date. We also have certain so-called most favored nation royalty agreements, which require us to record additional costs if certain material contract terms are not as favorable as the terms we have agreed to with similar licensors. > Cost of revenue also includes credit card and payment processing fees for subscription revenue, customer service, certain employee compensation and benefits, cloud computing, streaming, facility, and equipment costs, as well as the amortization of podcast content assets. Amortization of podcast content assets is recorded over the shorter of the estimated useful economic life or the license period (if relevant), and begins at the release of each episode. Cost of revenue also includes discounted trial costs. So assuming "predominantly" means between 50% and 60% (otherwise it would've been specified and used for marketing communications), they're spending about 44% on royalties. The other 30% is easily "spent", rather allocated, on: "credit card and payment processing fees for subscription revenue, customer service, certain employee compensation and benefits, cloud computing, streaming, facility, and equipment costs, as well as the amortization of podcast content assets" This is in line with the "Apple spends pays twice as much royalties with Apple Music".
- lrem 5y ago
  Thanks for looking at the primary source!

by lrem 5y ago

jbverschoor 5y ago

Because I said no.. and because I read the financial statement. The spotify Q1 financial statement https://investors.spotify.com/financials/default.aspx https://investors.spotify.com/financials/default.aspx https://s22.q4cdn.com/540910603/files/doc_financials/2021/q1/f3a5d6f7-4036-4117-9913-c35194e1371a.pdf https://s22.q4cdn.com/540910603/files/doc_financials/2021/q1... Page 4: > Revenue 2,147 1,848 > Cost of revenue 1,599 1,376 So 74%, but cost of revenue is: Page 32: Cost of Revenue =============== > Cost of revenue consists predominantly of royalty and distribution costs related to content streaming. We incur royalty costs, which we pay to certain record labels, music publishers, and other rights holders, for the right to stream music to our users. Royalties are typically calculated monthly based on the combination of a number of different elements. Generally, Premium Service royalties are based on the greater of a percentage of revenue and a per user amount. Royalties for the Ad-Supported Service are typically a percentage of relevant revenue, although certain agreements are based on the greater of a percentage of relevant revenue and an amount for each time a sound recording and musical composition is streamed. We have negotiated lower per user amounts for our lower priced subscription plans such as Family Plan, Duo Plan, and Student Plan users. In our agreements with certain record labels, the percentage of revenue used in the calculation of royalties is generally dependent upon certain targets being met. The targets can include such measures as the number of Premium Subscribers, the ratio of Ad-Supported Users to Premium Subscribers, and/or the rates of Premium Subscriber churn. In addition, royalty rates vary by country. Some of our royalty agreements require that royalty costs be paid in advance or are subject to minimum guaranteed amounts. For the majority of royalty agreements, incremental costs incurred due to un-recouped advances and minimum guarantees have not been significant to date. We also have certain so-called most favored nation royalty agreements, which require us to record additional costs if certain material contract terms are not as favorable as the terms we have agreed to with similar licensors. > Cost of revenue also includes credit card and payment processing fees for subscription revenue, customer service, certain employee compensation and benefits, cloud computing, streaming, facility, and equipment costs, as well as the amortization of podcast content assets. Amortization of podcast content assets is recorded over the shorter of the estimated useful economic life or the license period (if relevant), and begins at the release of each episode. Cost of revenue also includes discounted trial costs. So assuming "predominantly" means between 50% and 60% (otherwise it would've been specified and used for marketing communications), they're spending about 44% on royalties. The other 30% is easily "spent", rather allocated, on: "credit card and payment processing fees for subscription revenue, customer service, certain employee compensation and benefits, cloud computing, streaming, facility, and equipment costs, as well as the amortization of podcast content assets" This is in line with the "Apple spends pays twice as much royalties with Apple Music".

lrem 5y ago
Thanks for looking at the primary source!