Spotify Is The Best Streaming Service At Losing Money

No, seriously: Spotify is the best streaming service at losing money

spotify posts massive revenue increases in 2015 mighty audio 3 — Image used with permission by copyright holder

Spotify is getting better at losing money. The popular Swedish music service has finally released its financials from last year, showing revenues that grew a staggering 81 percent year-over-year to $2.2 billion.

But despite that huge revenue increase — laudable for a tech company of Spotify’s size and expansion rate — the company still lost $193 million in 2015, an increase of 6.7 percent over 2014’s losses.

Still, with revenue increases now significantly outpacing losses, that’s a good sign for the service. And it will likely boost future investor confidence; Spotify will probably go public in the next 12-18 months, given the terms of its recent $1 billion bout of debt-based funding.

Not surprisingly, the biggest contributors to Spotify’s financial successes were paying subscribers — 28 million (as of the end of 2015) paying subscribers generated $1.94 of Spotify’s $2.2 billion in revenue last year, with ad sales from 61 million free users generating just $220 million.

It’s good news, then, that paying members of the service are quickly on the rise. Spotify officially announced that it had 30 million paying users as of March, and is expected to grow at a rate of approximately 1 million per month. As more paid subscribers join the service, revenue should continue to increase with them.

“We believe that we will generate substantial revenues as our reach expands and that, at scale, our margins will improve,” wrote the company in a statement. “We will therefore continue to invest relentlessly in our product and marketing initiatives to accelerate reach.”

What 2016’s revenue increases will look like remains to be seen, but the company could have a few costly financial drains on its hands this year. Spotify is currently in the process of renegotiating its distribution contracts with major labels, and some sources speculate it may have to pay massive upfront fees to continue offering their music.

The Swedish streamer also is working on new original video offerings, and given a push for quality, that could end up costing a pretty penny as well.

Still, rising revenues are good news for the streaming industry in general, as big-name players like Apple Music and Spotify compete to prove that large-scale on-demand music can be a profitable enterprise.

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