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Spotify Records £26 Million Loss

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Spotify Loss

Despite growing revenue five fold and increasing its subscribers in Europe, music streaming service Spotify has announced an operating loss of £26.5 million.

The loss will be disappointing for Spotify when you take into account the large increase in revenue, up from £11.3m in 2009 to £63.2m last year. However while the revenue has increased, so has the amount of loss recorded, up from £16.6m in 2009.

The revenue boost was driven by increased advertising and subscriber rates with the company recently stating it had more than two million paying subscribers.

 Spotify Loss

In a bid to push more people away from its ad-sponsored free subscription model towards the ad-free paid subscriptions, it introduced a limit on the amount of music you could listen to per month.

Having to pay hefty royalty rates to the various record labels is the major outlay for Spotify and but these may be changing thanks to recent talks taking place: "The company and the group have successfully renegotiated and renewed licensing agreements with all major European record label groups," it said in the results, filed at Companies House in London.

Spotify Loss

Will the Facebook tie-in finally push Spotify out of the red and into the black?

While 2010 may have seen rapid expansion, 2011 is set to be even better with its launch in the US as well as its tie-in with Facebook, which gives it a potential user base of 750 million people.

"The group has ambitious growth plans and has signed license agreements with a number of U.S. record label groups for the U.S. market," the company said.

The Spotify business model is one which is being closely watched by the music industry and competitors to see when, or indeed if, it will become profitable.

"We see the development of Spotify as positive for the music industry as it could lead to genuine platform competition for iTunes, thereby increasing the value of the underlying content," UBS analyst Polo Tang said in a note to clients.

Source: Reuters

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