Each week, The MBW Review usually gives our take on some of the biggest news stories of the previous seven days. But we’re still busy delving into Spotify‘s 2015 financials, which showed revenues of $2.18bn but a net loss of $194m. The MBW Review is supported by FUGA.
The average Spotify subscriber in 2015 paid around €62.30 ($69.30) a year, or €5.20 ($5.78) a month, according to the company’s latest set of financials.
This figure is a low-end approximate, based on the number of subscribers Spotify had at the end of 2015 (28m) and the total amount of revenue brought in from premium accounts across the year (€1.74bn, or $1.94bn at current exchange rates.)
On the surface of it, a $5.78 monthly subscription average may seem like a disappointment to music rights-holders – especially those used to referring to Spotify’s $9.99/£9.99/€9.99 monthly subscription price.
But when you consider other factors, it’s perhaps more positive than it first appears.
In 2014 – at current exchange rates and on the same basis – the average Spotify subscriber paid €65.24 ($72.71) a year, or €5.44 ($6.06) per month.
Therefore, the value of an average Spotify subscription fell 4.5% from one year to the next – or $0.28 per person per month.
Considering Spotify uses a combination of telco bundles, territorially-sensitive prices and get-’em-cheap promotions to draw in new subscribers, labels may have feared a more dramatic drop.
Especially when you consider that the total number of subscribers from 2014’s year-end to 2015’s year-end grew 87% (up from 15m to 28m).
It’s also important to remember that 31.5% of Spotify’s official active user base (89m) were paying for the service at the end of last year.
That conversion rate was 6.5% higher than that seen in December 2014, when 15m subscribers were coughing up out of a total 60m active users – equating to just 25%.
So Spotify can point to both giant growth and significantly improved premium conversion to justify a relatively small drop in revenue-per-subscriber last year.
Is Daniel Ek fussed about trying to push up this average spend figure in 2016?
Not by the looks of things: Spotify has just started running a $0.99 for three months promotion to attract new subscribers in key territories (and a $9.99 for three months promotion to lure back lapsed subscribers).
That doesn’t mean ratcheting this revenue-per-subscriber figure wouldn’t be in Daniel Ek’s best interests, though.
Spotify posted a net loss of $194m last year, despite record revenues in excess of $2bn.
If it could have just pushed its average monthly subscriber spend up 10% – or $0.58 – to $6.36, Spotify would have been a profitable company in 2015.
Meanwhile, the average subscription spend across all global music services last year was significantly lower than Spotify’s – generating around $2.45 per month for music business rightsholders.
Food for thought.
The MBW Review is supported by FUGA, the high-end technology partner for content owners and distributors. FUGA is the number one choice for some of the largest labels, management companies and distributors worldwide. With a broad array of services, its adaptable and flexible platform has been built, in conjunction with leading music partners, to provide seamless integration and meet rapidly evolving industry requirements. Learn more at www.fuga.comMusic Business Worldwide