Spotify Sees Revenues Rise Although Losses Continue To Widen

Spotify

Analysts have been critical of Spotify’s business model outlining it as an “unprofitable business”.

Spotify, the world’s largest music streaming service, saw an increase in revenues reaching up to almost €2 billion in 2015. However, the company’s losses widened as it invested heavily in technology and marketing to go head-on with rivals.

The Swedish company, founded in 2008, saw a surge in revenue up by 80 per cent, equivalent to a €1.95 billion rise last year. Results were published in a financial statement by the Luxembourg-based company on Tuesday.

Spotify’s 80 per cent business growth in 2015 topped its 45 per cent increase in 2014. In 2013, it also saw a 74 per cent year-on-year rise.

The vast majority of the company’s revenues come from user subscriptions, rising up by 78 per cent to €1.78 billion.

“In many ways, it was our best year ever,” the streaming company said in a statement to its shareholders.

However, the Stockholm-based company’s net losses this year widened by 7 per cent, amounting to €173 million, up from €162 million in 2014. Spotify admitted that the company’s losses were largely due to investments it made in an attempt to fend off its competitors such as Apple, Deezer, Rhaposdy, and Tidal—the latter is headed by rap artist Jay-Z.

“We believe we will generate substantial revenues as our reach expands and that, at scale, our margins will improve. We will therefore continue to invest relentlessly in our product and marketing initiatives to accelerate reach,” Spotify said in a statement.

The music streaming service invested in improving its platform in 2015 by adding features like Discover Weekly, which creates a personalized playlist based on the user’s music preference.

Aside from investments that the 8-year old company made, large royalty payments to music copyright holders accounted for its biggest costs. Royalty and distribution fees increased by 85 per cent to €1.63bn in 2015.

“The fundamentals remain that it’s not a profitable business and it’s difficult to see how it will get to be a profitable business,” Mark Mulligan, an analyst at Midia Research, commented.

Spotify, meanwhile, offers subscribers access to millions of songs for a fee of about $10 a month. Its services are also open for free use, but users have less control over the songs that they can hear, and it includes advertisements that can interfere with the consumer experience.

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