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Old 12-30-2012, 07:20 AM   #41
Top100EbooksRank
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Posts: 304
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Join Date: Mar 2012
Device: Kindle
Quote:
Originally Posted by Kali Yuga View Post

"Economies of scale" only apply when your costs go down as your size increases.
Got it.

But a company with 5 million paying subscribers will be in a better shape to negotiate a better royalties rate compare to a 1 million paying subscribers company. The royalties rate is negotiable.

In addition, there are some cost that stay the same (fixed instead of variable). So this will benefit a 5 mil subscribers vs a 1 mil company.





As for Spotify valuation,

Spotify has raised about $100m from a group of investors led by Goldman Sachs in a round that puts a $3bn valuation on the company

Yes, its valuation could go down but it could go up too. Let's assume that Spotify will get 20 million subscribers one day.

20 million x $120 a year = $2.4 billion from subscribers revenue.

It pays 70% in music royalties, which mean it has $720 mil to pay for expenses (bandwidth, servers, personnel, office and other overhead). Anything left over = profits.

Last edited by Top100EbooksRank; 12-30-2012 at 07:22 AM.
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