Spotify Earnings Growth Still Comes At A Cost

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The 20,000 Foot View: Spotify’s 2016 accounts reveal strong growth in both revenue and user, as well as improved conversion to paid. But they also show growing losses (both in absolute and relative terms) for streaming music’s leading player. The health of Spotify is a bellwether for the health of the streaming music market and its current prognosis is that it is fit and healthy now, but that will end sometime unless it improves its lifestyle. 

Key Findings

• Spotify recorded revenues of        billion in 2016, up        from        billion in 2015
• Spotify added        million net new revenue in 2016 compared to        million in 2015
• Spotify’s total monthly user ARPU increased from        in 2015 to       
• Paid subscriber ARPU from        in 2015 to        pulled down by pricing discounts
• Spotify’s Cost of Sales (previously reported as Royalty Distribution and Other Costs) were        billion, or        of revenue, down slightly from        in 2015
• Spotify, and other streaming services, need to explore ancillary revenue streams such as data and rights to drive margin
• Big tech companies may seek to combine labels and streaming services to control the value chain and make the model commercially viable

Companies and brands mentioned in this report: Amazon, AOL, Alibaba, Merlin, Polygram, Spotify, Tencent, Universal Music, Vivendi