by Felix Richter, Statista.com
With roughly 100 million active users, more than 30 million paying subscribers and $2+ billion in annual revenue, Spotify is the undisputed leader in the booming music streaming market.
And yet, a look at the company’s latest results leads to one question: will music streaming ever be a profitable business?
In 2015, Spotify generated €1.95 billion ($2.18 billion) in revenue, an increase of 80 percent compared to the previous year. However, most of the gains were nullified by an 85 percent increase in the company’s royalty and distribution costs, mostly comprised of the money flowing back to record companies and artists. It is a pattern that has repeated itself over the years: however large the increase in revenue is, costs are piling up just as quickly which ultimately results in widening losses.
It’s a problem that all streaming providers face and it’s an issue 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. Companies such as Spotify will eventually have to figure out a way to keep royalty costs at bay in order to make music streaming a profitable and sustainable business.
This chart shows Spotify’s financial results from 2012 to 2015.
You will find more statistics at Statista.
