Spotify: Down Is The New Up

Spotify have announced that the service increased its losses in 2015 despite almost doubling revenue and significantly growing its subscriber base, triggering numerous think pieces about the future of Spotify and sustainability of streaming in general.

Revenues at Spotify jumped by 80% to €1.95 billion, with the lion’s share coming from paying subscribers, with premium revenues up by 78%. Interestingly, advertising income actually grew faster, by 98% to €196 million last year.

However, net losses were also up from €162 million in 2014 to €173 million in 2015.

So, what do all of these figures mean? For a start, they are not too alarming – all streaming services are losing money at present as they invest and in Spotify’s case, look towards an inevitable IPO.

Spotify also stated that “We believe our model supports profitability at scale”- in other words it’s a long game and a numbers game. In the meantime, the service is paying out to labels, publishers and collection societies and has invested significantly in marketing to try and convert all of those ‘free’ users into paying subscribers.

On the face of it, this seems to have worked, hitting 30m paying subscribers earlier this year.

Streaming is increasingly the biggest source of revenue for many labels, and the concern is that if this is dependent on a handful of loss making companies, the whole house of cards could fall down. It would be complacent to consider Spotify ‘too big to fail’ at this point, so achieving profitability is key to the service’s future. More concerning to Spotify is that those other ‘loss making’ streaming platforms are operated by Apple, Google and Amazon – three incredibly powerful technology companies with vast cash reserves.

On the subject of that future, there is an interesting piece over at Music Ally addressing this as Spotify turns ten and looking to the next ten years.