Some figures around Spotify are very public, like its 75 million active users; its 20 million paying subscribers and its $3bn of rightsholder payouts. Others need a bit more ferreting out.
The company’s engineering team dropped a new (as far as we can tell) stat yesterday via its Twitter account. “We process nearly 1 billion streams every day by running 9000 @hadoop jobs on our 1300 node cluster,” explained its tweet.
Which set off all kinds of maths in our heads. If it was a round 1bn streams a day, that would mean each active user averages 400 streams a month – or, taking four minutes as an average track length, around 27 listening hours if you don’t factor in skips.
We process nearly 1 billion streams every day by running 9000 @hadoop jobs on our 1300 node cluster. For personalization, analytics etc
— Spotify Engineering (@SpotifyEng) July 21, 2015
Even more sketchy would be to apply Spotify’s published average per-stream payout of between $0.006 and $0.0084 to the 1bn-streams-a-day figure: that would suggest daily payouts to rightsholders of between $6m and $8.4m, and thus annual royalty costs of between $2.2bn and $3.1bn – which given Spotify’s claim that it pays out 70% of its revenues, would in turn hint at $3.1bn – $4.4bn of annual turnover.
Which is why you can ignore that last paragraph, because Spotify’s annual revenues in 2014 were €1.1bn ($1.2bn) and we’re fairly sure its growth is steadier than a 2015 run-rate of $3.1bn-$4.4bn would suggest.
Update: As Steve Kelly of All Around The World pointed out on Twitter, skips are very important to any calculations like this:
@MusicAlly factor in an avg ~30% skip rate to reduce the payable volume (assume they still have to be processed to classify them as a skip)
— Steve AATW (@steve_aatw) July 22, 2015
Actually, we do have some data on Spotify skips, courtesy of The Echo Nest’s Paul Lamere. He published a blog post last year noting that 35.05% of songs are skipped in the first 30 seconds – which means they won’t generate a payout, but WILL need to be processed.
If 35% of Spotify’s 1bn daily streams are skipped before they generate a royalty payment, that changes the figures considerably. The remaining 650m streams (or “nearly 650m streams” – remember the earlier caveats) would generate payouts of between $3.9m and $5.5m a day, which would scale up to $1.4bn-$2bn a year, and thus annual Spotify revenues of $2bn-$2.9bn.
The lower end of that scale seems more within reach for Spotify in 2015, especially if it continues to add users (including subscribers) in the second half of the year.
Even so: three questions. First, how much less than 1bn daily streams is “nearly” in that tweet? Second, what percentage of those daily streams are on (lower) promotional rates? And third, how much has that average per-stream payout of $0.006-$0.0084 fallen since it was published in December 2013, as Spotify has added tens of millions more users?