Spotify doubled its revenues in 2012, but losses also rose as the streaming music platform seeks to expand in an increasingly competitive market.
According to the Financial Times, the latest financial filing from the digital firm in Luxembourg shows that revenues in 2012 went up from 190.4 million euros to 434.7 million euros, with the number of ‘active users’ rising to 20 million worldwide, over a quarter of which are paying premium service users. However, overall losses widened to 58.7 million euros, up from 45.4 million the previous year.
Of course few in the streaming music domain are making a profit, as services compete to reach a more mainstream audience, ie users who are harder to sign-up but almost certainly cheaper to service than early-adopting hardcore music fans.
Most streaming set-ups assume that various economies of sale will ensure profitability once they reach critical mass. Assuming they can. If that doesn’t work, they’ll likely want to cut their royalty obligations to the rights owners, though that won’t be easy given those parts of the music industry that already believe the streaming sector is getting too good a deal.
Despite the growth in losses, Spotify does seem to be moving in the right direction; though assumptions in its business plan will be more rigorously tested as the company matures.
Commenting on the figure itself, the digital company said in a statement: “During 2012 Spotify saw dramatically increased revenues while maintaining a free-to-paid conversion rate of well over 20% – unheard of for a freemium business, and a clear demonstration of the success of the business model”.
“In 2012 the business focused on driving user growth, international expansion and product development, resulting in soaring user numbers and increased market penetration. Our key priority throughout 2013 and beyond remains bringing our unrivalled music experience to even more people while continuing to build for long-term growth – both for our company and for the music industry as a whole”.