219/264 Notes to the 2017 consolidated financial statements Supported Service is free to the user. Revenue is generated through the sale of advertising. Royalty costs are primarily recorded in each segment based on specific rates for each segment agreed with rights holders. The remaining royalties which are not specifically associated to either of the segments are allocated based on user activity or the revenue recognized in each segment. No operating segments have been aggregated to form the reportable segments. Key financial performance measures of the segments including revenue, cost of revenue, and gross profit are as follows: 2015 2016 2017 (in € millions) Premium Revenue 1,744 2,657 3,674 Cost of revenue 1,487 2,221 2,868 Gross profit 257 436 806 AdSupported Revenue 196 295 416 Cost of revenue 227 330 373 Gross (loss)/profit (31 ) (35 ) 43 Consolidated Revenue 1,940 2,952 4,090 Cost of revenue 1,714 2,551 3,241 Gross profit 226 401 849 Reconciliation of gross profit General expenditures, finance income, finance costs, taxes, and share in (losses)/earnings of associates and joint ventures are not allocated to individual segments as these are managed on an overall group basis. The reconciliation between reportable segment gross profit and loss to consolidated loss before tax is as follows: 2015 2016 2017 (in € millions) Segment gross profit 226 401 849 Research and development (136 ) (207 ) (396 ) Sales and marketing (219 ) (368 ) (567 ) General and administrative (106 ) (175 ) (264 ) Finance income 36 152 118 Finance costs (26 ) (336 ) (974 ) Share in (losses)/earnings of associates and joint ventures — (2 ) 1 Loss before tax (225 ) (535 ) (1,233 ) F26
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