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