What is Spotify MRR? Python Analysis

We are all about MRR, and I have decided to calculate Spotify MRR using public data sources. Therefore, this analysis cannot be taken as a reference.

Monthly Recurring Revenue, commonly referred to as MRR, is the main objective for any subscription business. No matter how big or small the organization is, this KPI is rigorously analyzed every month, stressing out entrepreneurs worldwide.

Do you want to know how to calculate Monthly Recurring Revenue? Read here.

I want to highlight the following: 

1. To calculate the MRR accurately, you must also have data on churn, upgrades, downgrades, and activations. Of course, Spotify doesn’t disclose this information. 
2. This is MRR is just an estimation based on the following KPIs that are publicly available:
   • Total Premium Subscribers
   • Average Subscription Price
3. We will be using Python for this analysis, but this is not a tutorial.
4. Data sources links: 
   • Statista
   • Business of App

Let’s the data analysis begin

1) Python Libraries:

• Pandas: data analysis and manipulation tool.
• Numpy:  support for large, multi-dimensional arrays and matrices, along with a large collection of mathematical functions.
• Plotly: The coolest graphic library for Python.

2) Python Code:

• Run Jupyter Lab on your terminal.
• Import the following Python libraries.
• premium_subscriber.xlsx is an Excel file that I created using Statista as a data source:
  • Total of premium users (paid)
  • From Q1 2015 to Q3 2021

3) Calculate the Delta for the total revenue by quarter:

• The MRR can be calculated without calculating Delta. I did it just to show you my Python skills.
• To calculate the variance, I used two Python functions; diff() and shift().

4) Let’s stop to analyze some KPIs:

• The number of premium subscribers on Spotify has been growing by 9.2% on average  each quarter.
• 154M premium subscribers has been added since Q1 2015.

5) Average Revenue Per User (ARPU):

• We need a starting point to calculate revenue based on the millions of subscribers quarterly, so I calculated the ARPU using the following criteria:
  • I used the Spotify pricing page to get the different plans:
    • $9.99
    • $12.99
    • $15.99
    • $4.99
  • The following is an estimation of average revenue per user based on adding up the plan’s prices and dividing them by the total plans (which are four):
    • The ARPU is $10.99
  • Having calculated the ARPU, we can now have an estimation of the total revenue by quarter, year, ct.

6) Let’s stop to analyze the MRR:

• Spotify has surpassed 1 billion in revenue 75% of the time.
• The standard deviation exceeds $500M quarter by quarter (we can definitely say that Spotify is doing an outstanding job by increasing its revenues at this rate).

7) Monthly Recurring Revenue (Quarter by Quarter): 

8) Annual Recurring Revenue:

• Based on the MRR analysis, Spotify’s ARR was above $6B in 2020. (Covid-19 definitely impacted this KPI positively).
• Spotify’s ARR has been growing by 44% year over year.

Clearly, Spotify is on course to become one of the biggest companies, especially in its industry. I will definitely buy some stocks.

This growth is remarkable!!!! Go Spotify team.

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Read More:

MRR: What is Monthly Recurring Revenue?

Improve MRR Performance:10 Tips for Improving Your MRR for Better Business Growth

Financial Forecasting… What is it?

Churn Prevention: How to Identify & Prevent Churn with Radix

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