Spotify’s “Family Plan,” a variation of which launched in 2014[1], as well as its “Student Plan” appear to be driving a significant portion of the company’s growth and improving retention, as the company points to it multiple times in its filing for a direct listing on public markets today[2].
But that also comes at a cost of decreasing the amount of revenue it actually gets from each premium subscriber. In the filing, Spotify indicates that the fee for a family plan — which costs $14.99 per month — can be actualized over as many as six accounts total (though it might not always be six). The premium user consists of the one master premium account, which pays for the subscription, and up to five sub-accounts for family members. Spotify is also pointing to its student plan, which costs $4.99 a month, as another contributing factor to those pressures. This means that even though Spotify is gathering more premium users, the actual revenue it generates from those users can drop over time.
And, indeed, that’s what’s happening, according to the filing. Spotify said its premium average revenue per user was around €5.24 in 2017, compared to €6.00 in 2016 and €7.06 in 2015. Spotify recognizes in the filing (“Family Plan” is mentioned nearly three dozen times) that this is partly due to the family plan. But at the same time, churn — a significant metric for subscription services that shows how many users are coming and going — is dropping each year and the number of hours users are listening are significantly increasing. Churn was 7.5% in 2015, and it’s down to 5.1% in 2017, content hours have more than doubled in that time from 5.4 billion hours to 11.4 billion hours....