I started playing around with numbers a bit here.
While a lot of assumptions are still not clear, I now believe that the additional impact from the price increase in the U.S. will be higher than previously assumed.
Additionally, we have confirmation from Spotify’s press release that they will raise prices in a lot of important European markets.
@Aron found some good additional resources:
- According to Bloomberg Research individual accounts make up more of Spotify’s transaction value in the U.S. than i previously assumed
- JPMorgan analyst Doug Anmuth estimated that Spotify’s price increase could lead to an additional $1.4 annualized billion in revenue.
My current estimate which does not take the new data from Bloomberg into account yet, arrives at approx. $400 million in additional revenue from the united states.
Given that this estimate is on the low side due to unfavorable assumptions and price hikes in other countries are not included yet I estimate that Spotify’s additional revenue will be at least $700 million or half of Doug Anmuths estimate.
Spotify has been asked in its latest analyst call how content they are with the deal they reached with content partners when it comes to the price increase. Their answer was that they “feel really good about the situation” and that they are “at a situation where we are at a win-win with all of our rights partners”.
Based on those comments I believe that Spotify receives 35%-50% of those additional revenues. This means their additional annualized profit should be $250 million at the low end and up to $700 million on the high end. (based on Doug Anmuth’s estimate and 50% take rate)
We will probably get some clues into the actual conditions of the deal and the impact on gross margins of the price increase in next quarter’s guidance.
If someone is interested to play around with numbers as well (be careful that you arrive at the correct Arpu of all users combined) feel free to do that on the same sheet, below my numbers.