Comment by cocoflunchy | Hacker News Reader

Comment by cocoflunchy | Hacker News Reader

It would be interesting to know if they earn more money on subscriptions or on ads. If it is the former, then why not cut all free plans and leave only the subscriptions?

If I understood correctly, they pay a fee to the records company each time someone plays a song. Even if they're making half their revenue on the free plan, cutting royalties by something like 95% (just guessing) and losing 50% of the revenue doesn't seem like a bad idea... Of course they lose on advertising, but is there something else I'm missing?

I must be missing something here with regards to revenue. Spotify has 15 million users, 4 million of whom are paid subscribers. So 11 million free users.

They have two paid plans: $60/year and $120/year.

If we assume the following structure:

    11000000 free users @ $0.50 ad revenue per year = $  5,500,000
     4000000 mid users @ $60/year                   = $240,000,000
           0 top users @ $120/year                  = $          0

For a total of $245.5 million in revenue, already more than reported here. And those proportions for their two paid plans are clearly ridiculous. But even if their free users provide $0 in revenue _total_, they still only have 2% of paid users on their top plan.

You're not taking growth into account - they're still more than doubling each year. You'd have to use the average user count to do math properly, not today's user count.

Ah, dead on! Those user figures are from August this year but the revenue is listed as 2011. Thanks.

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