Spotify's Revenue

Clarify question

• Spotify all over the world or in US alone? US alone

Required numbers

• Spotify Active Users
• Spotify Paid Users
• Premium Subscription $$

Estimating the numbers

• Spotify Active users = ? Do not know, let us assume and arrive at it
• Spotify Active users = 300 * 0.6 * 0.5 = 90 million
• US population = 330 million
• of users who listen to music via digital apps = 60% (excluding kids and older generation)
• % of users lost to competition like Apple Music, Youtube etc = 50%
• Premium Subscription: 10 dollars per month
• Spotify users eventually pay if not in the initial month. They may pay for 1 month or 3 years, that we will consider in the next part. You have heard that their conversion rate is way too good and not below 10% for sure. Assume free to paid % = 25%

Estimate with equation

• Revenue per month from premium spotify users = Spotify Active users per month * premium subscription $$ * conversion rate
• = 90100.25 = 225 million $

State your assumptions

• I assumed conversion rate is high about 25%
• I assumed 30% of US population uses Spotify on a monthly basis

Sense Check

• Compare with known revenue of competitors or Spotify total revenue (if you know them)