Spotify Yet to Show Profits

Spotify, counted as the most used and favorite music streaming service, is yet to show profits, despite it having millions of users. The company has previously termed 2014 as its “transformative” year during which the company revenues surpassed $1.12 billion. However, the figure conceals the fact that the company suffered a substantial increase in its net loss.

Crunching numbers

The published financial results of Spotify reveal that the company’s revenues jacked up from $838 million in 2014 to touch $1.21 billion in 2014, a 45 percent growth year on year. However, the company also recorded a $183.35 million operating loss in 2014 as compared to $102.39 million in 2013. The net loss also tripled- from $62.76 million in 2013 to touch $182.21 million in 2014.

Spotify’s managing directors, Par Jorgen Parson and Martin Lorentzon, in their management report, continued to maintain an optimistic outlook concerning the Spotify business sustainability. The directors are of the view that the present business model fully supports scalable profitability. They said that the company has already proven to give created real value and the knowledge that the more time a person spends with the product, there is a greater chance of that person becoming a paying subscriber.

Parson and Lorentzon also said that they believe in generating substantial revenues with expansion of its customer base, and the margins of the company will show much improvement at bigger scales. The company will continue its investments in the product and also in its marketing initiatives to expand reach.

Transformative year

The two managing directors also put out a note for its rivals like Apple Inc. (NASDAQ:AAPL) who are pressuring Spotify to cease is on-demand and unlimited free tier, that three quarters of the service’s 60 million users log on to. They have pointed out that subscription exclusive models are not feasible free user and scale models, and not shown any signs of profitability. Spotify, they pointed out, has power of both.The report authored by the company management termed 2014 as the company’s transformative year as Spotify expanded its 36 million use base-which is active- to 60 million in 2015. The second number is inclusive of 15 million subscribers who have paid the company for its service. The company also launched its Canada, Brazil and Philippines service in 2014, increasing the company’s total market reach to 58. It also signed a number of partnership deals with home audio companies and telecommunication firms. 

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