Just saw this CNN article on Spotify which says they just posted their first quarterly operating profit. Monthly active users grew by 29% and they have 96 million paid users. They still expect to lose between 200 and 400 million dollars in 2019 on revenue expected to hit 7.7 billion dollars.
Makes you wonder how the smaller streaming providers like Qobuz and Tidal can compete in the long run.
Apparently there is something to the old adage about “loosing money on every widget sold but making it up in volume”
Seriously it does seem unbelievable especially when you consider they have another 100 million or so customers using their ad supported offering.
And don’t forget they have been around since October of 2008 and this was their first reported quarterly profit. How much money have they burned through in just over 10 years and where did it all come from?
They raised USD$2.8 billion before they went public. Also their IPO was unusual in that it didn’t raise any money, it just converted the privately held stock to publicly traded stock.
Yes, that means they burned over $2B in 10 years, all raised from Venture Capitalists (and in later rounds from investment banks (Goldman Sachs), large tech companies (Tencent), and even brands (Coke)).
Got to love what the Internet has allowed technology related businesses to get away with … everybody willing to throw money at almost anything hoping to find the next big thing that is used by “everyone”.
Nice. They would all have a magical number of paid subscribers that they calculated would be the break even point. Their calcs would show (to them) that after this number, it would be happy sailing.
Spotify stuck through it and maybe they calculated many years ago that their magical number was ~100 million paid subscribers (for them). Would be great to see their internal/in-house guesstimates from 10 years ago and then maybe also 5 years ago but I doubt we’d ever get to see those internal calcs.
These guys have their own magical number they’re chasing. As long as subscriber numbers continue to grow at a certain rate to reach their magical number of subscribers by a target year, they’ll probably stick at it (and continue to raise funds to help them along).
In Dec 2017 Qobuz shared some info (Google translate):
With an average revenue per subscriber of 178 euros per month, the expenses of its customers are however much higher than those of Spotify.
The company created in 2008, was resumed last year at the Commercial Court by the company Xandrie Denis Thébaud.
" I kept everything that made Qobuz’s character, the quality of the sound and the editorial quality, and I redid all the back office and the digital factory ", explains Denis Thébaud.
" We have redid IoS and Android applications and we still have the site ready for next year ," he continued.
Qobuz has a turnover of 9.1 million euros for 2016-2017 and a negative gross operating result of 4.8 million euros.
He expects to achieve profitability in 2020-2021 with a turnover target of 108 million euros."
How do they generate average revenue per subscriber of 178 euros per month when the typical subscription price is less than 30 euros? Does every paid subscriber purchase around 150 euros worth of downloads? I can’t believe that is possible!
Based on 178 euros per subscriber in 2016-2017 and turnover of 9.1 million euros they would have only had just over 51,000 subscribers. Hard to find actual subscriber numbers but I’m pretty sure they have 2-3 million now and there is no way they grew from 51,000 to 3 million in 2+ years.
If they achieve a turnover of 108 million euros in 2020-2021 then at 178 euros per subscriber they would have just over 606,000 subscribers or about 20% of what they supposedly have now.
I don’t doubt that their audiophile customers purchase a lot but at the end of the day they are only a small percentage of their subscriber base and I suspect most subscribers just stream.
Just my opinion …no real numbers available to analyze.