Spotify:

Spotify had 751 million monthly active users.

461 million of them had never paid for anything.

Monthly Active Users (MAU) was never a measure of the business. It was a placeholder.

Spotify couldn't lead with profit because there wasn't one.

Couldn't lead with Average Revenue Per User (ARPU), €4.57 wasn't a strong enough story.

The record label deals gave Spotify almost no room on margins.

So they led with reach. Reach meant MAU. The market accepted it.

This wasn’t uncommon, every streaming company was doing the same thing and nobody wanted to call it out while the stock was climbing.

To qualify, they just opened the app. Not subscribed. Not paying. Opened.

You could launch it by mistake while reaching for your camera and you would still be in the quarterly results.

The 461 million free users were not a waiting room full of people about to subscribe.

They were a royalty bill.

Every stream, paid or not, cost Spotify money.

Labels got paid. Spotify didn't.

ARPU, across the whole base: €4.57.

Less than a pint.

Considerably less than what Spotify paid out every time someone played Bohemian Rhapsody for free for the fourteenth time that week.

The free tier wasn't a funnel. It was a subsidy.

The market treated the people receiving it as proof the business was working.

The stock followed the MAU number like it meant something.

Free-to-paid is now 38.6%. Revenue hit €17.18 billion. Spotify is profitable.

The model worked.

It just needed fewer people treating a music service like a lending library and more of them sighing and typing in their card details.

751 million users. 290 million customers. The other 461 million were a cost.