Spotify’s profits are driven by premium users

Spotify reported record profits after price hikes

Spotify’s free tier is just the icing on a very large, increasingly profitable, premium cake

7/23/24 12:42PM

Stairway to heaven

Spotify is singing a tune that investors are thoroughly enjoying this morning, with shares in the world’s largest music streaming platform up more than 10% after the company reported a record quarterly profit, continued subscriber growth, and strong guidance for the rest of the year.

While there was a lot of noise around Spotify increasing prices for the first time ever last summer, and then again earlier this year, premium users weren’t perturbed. Indeed, despite having to cough up more for their music, Spotify’s subscriber numbers were up 12% year-on-year to a record 246 million. The combined effect of higher prices and more subs? Revenue from premium users that was up 21%.

That’s of course carried over to the company’s bottom line too, where it’s also still all about music fans who are forking out a monthly fee: per our calculations, Spotify’s premium users accounted for 95% of the company’s gross profit over the last 12 months.

Oops!... I did it again

Given that this quarter only accounts for up until the end of last month (June 30th), it’s reasonable to assume that the figures mostly reflect just the price hike from last year, while the US price hike in June 2024 has yet to fully wash through for an entire quarter.

Many people seem increasingly willing to live with constant advertising interruptions when sitting down to watch something from their favorite streamers (especially if it means the platforms get considerably cheaper). Indeed, streamers like Netflix are finding success cutting prices for inflation-weary consumers by offering ad-supported tiers.

Music might be different. So far, it seems like watchers might be more price sensitive than music fans: Disney+ actually lost users after its price hike, while Spotify has continued to grow. I guess the question boils down to what is more annoying? An ad interruption during your nightly TV binge, or an ad that breaks up your favorite album?

Max Knoblauch3h

After upsetting GOP senators, GM scraps its EV tax credit extension plan

Roughly a week after it was first reported, GM’s plan to extend the now-expired $7,500 US federal EV tax credit to customers through a leasing program is no more.

Last week, Republican Senators Bernie Moreno (Ohio) and John Barrasso (Wyoming) wrote a letter to Treasury Secretary Scott Bessent urging him to change the IRS rule that they said allowed automakers to game the law that ended the tax credit, “bilking” taxpayers.

Automakers GM and Ford, who each saw juiced-up EV sales ahead of the tax credit's expiration, sought to extend the subsidy by using their financial arms to put down payments on EVs already on their dealers’ lots. Those payments would qualify for the credit prior to its expiration, and the automakers would pass the savings along to lessees for several more months.

GM will now instead fund the incentive through the end of October without claiming the tax credit, Reuters reports.

Ford did not respond to a request for comment on whether it will similarly scrap its plans.

Exclusive: GM backtracks on plan to claim last-minute EV tax credits

GM will now instead fund the incentive through the end of October without claiming the tax credit, Reuters reports.

Ford did not respond to a request for comment on whether it will similarly scrap its plans.

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