Spotify makes huge losses – but isn’t worried

Music streaming service Spotify is burning big money despite its increasing popularity.  Financial data analyst company Privco got their hands on private financial resulst of Spotify and found that while Spotify’s revenues grew 151% in 2011 it hasn’t made a single dollar profit. Spotify’s business model is to sell subscriptions to its music streaming service and it offers a free streaming service with advertisements to generate interest.The latter are good for 15% of Spotify’s income, the subscriptions account for 84%.

In 2011 Spotify had a loss of 60 million dollar. The main costs of Spotify are the license fees to content owners, such as record labels. Out of every dollar Spotify earns, about 98% goes to them, according to Privco.  Also the 311  employees in 2011 accounted for a large share of the companies costs. While Privco notes that the business model of Spotify should be re-considered, Spotify itself disagrees. In a statement to the Dutch website MT.nl, the company states that Privco is wrong and that content owners receive about 70% of each dollar Spotify earns.

Their spokesman told the website:  ”we are confident about our business model, we’re not profitable yet, but we didn’t expect that as fast growing start-up” , he goes on to say, “We’re in an agressive growing stage, we invest heavily in launching into new markets”. In other words they make a loss, but it’s factored.