spotify-arpu

Spotify ARPU

YearARPU
2021€4.29
2022 €4.52
FourWeekMBA BI Intelligence – Source data: Financials

When you look at Spotify’s ARPU and compare it to other attention-based business models like Facebook’s ARPU, you realize how much lower that is.

facebook-arpu
The ARPU, or average revenue per user, is a key metric to track the success of Facebook – now Meta – family of products. For instance, by the end of 2022, Meta’s ARPU worldwide was $10.86. While in US & Canada, it was $58.77; in Europe, it was $17.29; in Asia, $4.61 and in the rest of the world, it was $3.52.

However, there are a few considerations to make here.

Spotify’s business model, contrary to Facebook, is primarily skewed toward premium members who pay a subscription to the platform.

Those members are kept on the platform with engaging content, which is released continuously, and it’s optimized for a long engagement.

Thus, a business model like Spotify fundamentally differs from other attention-based business models, as it’s a mixture of subscription and ad-supported.

Whereas a company like Facebook needs to optimize its ARPU to make it as high as possible in the short term since this is subsidized by advertisers (companies pay to advertise on top of Facebook, which is what makes up its average revenue per user).

On Spotify, the company optimizes for the lifetime of the subscriber.

In short, it will take less today but for a more extended period.

Spotify’s ARPU, over time, might increase substantially if the company strengthens its ad-supported segment.

In fact, for that segment, Spotify can work on increasing the short-term value of ARPU thanks to the advertising network, similar to what Facebook does.

There, then, it’s all about being able to scale up the Spotify advertising machine!

Read Also: How Does Spotify Make Money, Spotify Model, Who Owns Spotify, How Does Twitch Make Money, How Does SoundCloud Make Money, Who is Daniel Ek?, Who Is Martin Lorentzon?

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Spotify Business Model

spotify-business-model
Spotify is a two-sided marketplace, running a free ad-supported service and a paid membership. Founded in 2008 with the belief that music should be universally accessible, it generated €11.7 billion in 2022. Of these revenues, 87.4% or €10.25 billion came from premium memberships, while over 12.6% or €1.47 billion came from ad-supported members. By 2022, Spotify had 489 million users, of which 205 million premium members and 295 million ad-supported users.

Spotify Advertising Business Model

spotify-audience-network
Spotify Audience Network is the underlying advertising infrastructure that supports its ad-supported user base. The Spotify Audience Network was born as the result of the acquisitions of Anchor and Megaphone. By 2022, Spotify had 273 million ad-supported users.

Economics of the Spotify Business Model

licensing-model-spotify
Spotify licensing deals affect its business model. The company runs on both a free service, which is ad-supported and a subscription premium service. They have different economics. The ad-supported business had a 10% gross margin in 2021, compared to 29% of the subscription-based business. That’s because the more the content gets streamed on the platform, the more that increases royalty costs for Spotify. That is also why the company invested in developing its content. Thus, in part transitioning from platform to brand.
spotify-model
The Spotify Model is an autonomous approach to scaling agile, focusing on culture communication, accountability, and quality. The Spotify model was first recognized in 2012 after Henrik Kniberg, and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility. Therefore, the Spotify model represents an evolution of agile.

Who Owns Spotify

who-owns-spotify
The multi-billion music streaming company Spotify is primarily owned by its founders, Daniel Ek and Martin Lorentzon. As of 2022, Daniel Ek has 16.5% ownership of ordinary shares and 31.7% of the voting power. Martin Lorentzon has 10.9% of ordinary shares and 42.6% of the voting power. Another key shareholder is Baillie Gifford & Co, a Scottish-based money management firm, followed by Morgan Stanley, T. Rowe Price, and Tencent.

Spotify Revenue

spotify-ad-revenue

Spotify Users

Spotify Free Users

Is Spotify Profitable?

is-spotify-profitable
Spotify is not profitable. The company’s net loss in 2022 was €430 million, compared to €34 million in losses in 2021, and €581 million net losses in 2020.

Spotify Cost Structure

spotify-cost-structure

Spotify ARPU

spotify-arpu

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