A True Reflection of Spotify

Posted on Posted in All Recent, Companies

Published: Sat 11th March 2017

Read Time: 3 minutes

A True Reflection of Spotify

On the 2nd of March this year, Spotify, the music streaming service, publicised a major news announcement that they “hit the target” of 50 million paid subscribers. It was the first company among its competitors, such as Apple Music, Amazon Music and Google Play Music, that could reach this milestone. Looking at this feat, we could argue that Spotify is definitely successful, however, this is not entirely correct and I want to find out why.

 

Without any doubt, Spotify is a leader in the music-streaming platform market, with more than 100 million users, and currently half of them on payments. The service was first launched in Sweden and it is now a major player in the USA, most European countries, Australia, New Zealand, and is available in various Asian territories. This may seem positive on the surface, but the real problem appears when we search for its revenue and costs statistics.

 

What The Statistics Show

According to this, we can tell that the revenue increases over time, as does net loss. Here, it is important to mention that increased revenue doesn’t always mean profit is made. Spotify is an ideal example of this case. If we look at the figures for 2015, we can see Spotify could earn up to € 2,000 million, but royalties and distribution costs together with other expenses were higher than revenue. Spotify primarily receives its revenue from Premium subscription and different advertisements. The costs include payments to major music label partners - royalties, payments to music publishers and to the music industry in general.

 

To sum up, Spotify is facing some real problems that should be solved as quickly as possible, in order to maintain good reputation among stakeholders and increase turnover. My advice would be to try to negotiate more profitable deals with music labels and publishers, or spread some of the existing financial risks by finding a suitable company for a merger.

 

Regardless of Spotify’s financial situation, I wish them the very best for successfully running in the long term – and hope they continue to please music lovers like myself.

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