Do The Math: How Big Will Spotify’s Revenues Be In 2010?

27 thoughts on “Do The Math: How Big Will Spotify’s Revenues Be In 2010?”

    1. I care about it. I live in the USA and have been using Spotify for two and a half years (I know a guy who knows a guy that works for Spotify). It is great, but if I didn’t have it I think Grooveshark would do an okay job holding me over.

  1. Good article! Agree with you, there is no need to go crazy about the loss in 2009. They are still very young and have grown alot since then, and as you say they will probably show some good results for 2010.

    What I really like about Spotify is that it may not make as much per user as lets say itunes but it has, at least in Sweden, stopped alot of people from pirating. That means Spotify is generating money to the labels from people who earlier wouldn’t have made the labels and artist a dime!

    1. Patrik

      Interesting observation on the piracy. I could also make a point that one tends to buy much less music as a result. I have seen that Spotify has helped focus and improve my songs-i-must-buy selections.

      1. Om, great article – thanks for this!

        I remember in a recent presentation by Andreas Ehn (former CTO) talking about their number one competitor: piracy. They needed to create a service where piracy would be used as a benchmark. A very interesting approach, but I think it is exactly for this reason the service is so addictive and amazing.

        Also, I’m not the right person to comment on this, but they have a genious infrastructure build up to support their business. Andreas Ehn shared in the same presentation that around 10% of total traffic (if my memory serves me right) in Spotify burdens their servers as it’s all built on p2p file sharing technology and people download songs from each other.

    2. I agree Antti, It’s true that they have a very stable application. They have a great team and as one of them are the creater of bitTorrent client µTorrent they know a thing or two about p2p-technology.

  2. Quite good article, apart from some maths issues and poor assupmtions.

    the subs revenue using your assumption of 41,600 new subs per month with 90% paying €10 and 10% paying €5 gives 12 months (see markp comment) revenue of €59,325,600.

    I’m afraid that your assumption that ad growth will be the same proportion of total revenues again this year is seriously flawed – total non-paying users did not grow at the same rate as paying users, and also there is simply no way the online audio ad market is anywhere near €40m yet (given that the whole radio ad market in the UK (Spotify’s biggest market) is only ~ £500m) – nevermind Spotify’s share of it.

    Total free users at end of 2008 were ~1m, 2009 ~6.75m, 2010 ~9.5m. apparently time per user per week has dropped from about 2hrs (2009)to 1.5hr (2010). therefore the increase in free user hours is only 73% – so if they achieved a similar rate of ad rev / user hour I would estimate that their ad revenue for 2010 will be more like just under £8m.

    this gives them a total ad rev of just over €67m.

    Still not bad. the question is how much will they have to pay the labels? are all those free listener hours worth it?

    1. Yup, Vizier My bad. I ended up including December 2009 revenues. I should have rechecked the numbers and rechecked them again. Thank you and @markp for catching that and flagging it for me. I totally appreciate it.

      On the advertising revenue part, I actually don’t use them in my calculations at all and use subscriptions as a more accurate barometer of their business. I mean unless there is someone who hands me the advertising sales for the company, I wouldn’t know.

      That said. I would say your advertising model makes a lot of sense and merits more investigation. I am going to dig around a little. Maybe the “slow advertising revenues” is why they need to get into the US fast.

      PS: Interesting data stat for their average time spent on service. Can you help me source that?

  3. Updated with correct numbers? Call me old-fashioned, but that sounds like a correction. What’s next–Updated with correct facts? Updated to reflect fact the author now takes the opposite viewpoint?

      1. apologies for the tone…a cheap shot…I just felt a tad misled by the “updated…” which to me suggested the story now featured additional, relevant information…

  4. Spotify is the first subscription service I would pay for. Spotify is a great example of how “making applications social” really ads significant value. The facebook integration features make music discovery much easier. The ability to listen to your facebook friend’s playlists and to “send” a song to your friends is great.

    If the labels are concerned about iTunes dominance in the US, they should liscense spotify. Because if iTunes ever got facebook integration with shared streaming playlists and cloud service like spotify has, it would be over. Too bad I live in the US and I can’t use spotify without jumping through a bunch of nonesense hoops.

  5. They nailed it, industry on board (gave them a chunk), flexible revenue streams (freemium, ad funded, subscription – tailor to locale), fill in any holes with own music.. and a seriously great product.

    Imagine.

    – Being included in hundred of millions mobile contracts globally.
    – Video/TV same way (its just media)
    – Trillions & Trillions of potential streams in China, India, Africa (fastest growing mkts in world = fastest growing Ad mkts)- yeah small now but give it a few years.

    I’d say the future’s bright.

  6. Looks like the maths is still wrong….If spotify is adding 41,600 new subscribers every month and say all were paying 10 Euros, it still means increase in subscription revenues of @416,000 Euros per month.

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