[clfougner]

Subscribers pay 10$ a month, of which 70% goes to the artists/record labels. Spotify itself then has a a revenue of 3$ per user per month, or 36$ per user per year. 60 million subscribers gives an annually recurring revenue of 2.16 billion dollars. From the chart in the article, they grew from 50 to 60 million subscribers over 4 months, so that annualises to a 60% growth rate on 2.16 billion in revenue (ex royalties). Questionable how long they'll be able to maintain that growth rate, but at the moment it's looking great.

One factor that hasn't been accounted for is the hosting costs for streaming/data transfer. Ballpark: assume the average user listens to music 1 hour/day, 365 days a year, at a bitrate of 320 kbps: 320 * 60 * 60 * 365 = 420480000 kilobits = ~50 gb per user per year. AWS' pricing page [1] has the lowest listed rate of 0.05$/gb (in reality likely lower for a huge client like Spotify), which amounts to a data transfer cost of 2.5$ per user per year, on a revenue of 36$.

Further Spotify has a large number of free subscribers (around 50-100 million, don't think figures have been released for this recently), which produce far less revenue per user from ads, but do generate revenue nonetheless.

Seems to me that it should be entirely possible to become decently profitable, provided that customer acquisition costs don't grow out of hand. For context: Facebook had an ARPU in the US and Canada in Q2 2017 of 19$, whereas Spotify has an ARPU of 9$ per quarter (ex royalties). If Spotify can be half as profitable as Facebook (on a per user base) and can keep growth going at this rate, they should be able to do fine.

[1] https://aws.amazon.com/ec2/pricing/on-demand/