econintersect .com

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 25 June 2017

Spotify's Losses Widen As Royalty Costs Pile Up


-- this post authored by Felix Richter

With more than 50 million subscribers, 140 million active users and nearly $3.3 billion in annual revenue, Spotify is the undisputed leader in the booming music streaming market.

Please share this article - Go to very top of page, right hand side for social media buttons.

And yet, a look at the company’s latest results leads to one question: will music streaming ever be a profitable business?

According to financial filings released a week ago, Spotify generated €2.9 billion ($3.3 billion) in revenue last year, up 52 percent compared to 2015. However, the company’s expenses piled up just as quickly, leading to a similarly steep increase in operating losses. Spotify spent nearly €2.5 billion ($2.8 billion) on royalty and distribution costs related to content streaming last year, eating 85 percent of its revenues. Adding to that expenses for product development, sales and marketing and general and administrative costs, Spotify’s operating loss amounted to €349 million ($390 million) last year.

Balancing revenues and licensing costs is a problem that all streaming providers face and one that might eventually give Apple a competitive edge over Spotify and its peers: Apple has a hugely profitable hardware business and billions of dollars to spend. As long as Apple Music supports hardware sales and helps to lock users into the Apple ecosystem, it probably doesn’t matter if it’s profitable. Spotify doesn’t have that luxury and will eventually have to figure out a way to keep royalty costs at bay. The new deals the company recently signed with Universal Music Group and Merlin, which represents a group of independent labels, could be a step in the right direction as they reportedly give Spotify better royalty rates and thus improve its chances of becoming profitable.

Spotify is currently valued at $13 billion and is reportedly planning to go public later this year or early 2018 through a direct listing at NYSE.

This chart shows Spotify's financial results from 2012 to 2016.

Infographic: Spotify's Losses Widen as Royalty Costs Pile Up | Statista You will find more statistics at Statista.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Contributors

Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved