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News June 16, 2017

Spotify turned over $3 billion last year, but still saw its losses double to $581m

Spotify turned over $3 billion last year, but still saw its losses double to $581m

Spotify has become many people’s go-to platform for music streaming, but as more and more listeners jump on board, the losses continue to pile up.

The company has today declared a net loss in 2016 of $581m USD, Billboard reports, despite revenues climbing over a billion dollars in the same period, from $2.014b USD to a new total of $3.064b. Those losses are up significantly from the 2015 figure of $257m, with the increase in revenue nowhere near enough to cover the increased licensing costs from servicing so many new consumers.

The figures somewhat overshadow the announcement that the service has now hit over 140 million users globally, up 40% from the same time last year, but only 50 million of those users have paid subscriptions. Those subscribers make up the vast majority of revenue, contributing $2.76b, while ad revenue trails behind at $308.1m.

Some high points from the report include an increase in revenue from paid subscriptions (up 52%, with the subscriber base growing from 28m to 40m), a similar increase in overall ad revenue (up 50%), and the service’s launch into Japan – a hugely important market and part of the company’s continued push into vital Asian territories.

While the company announced that it has raised a further $1b from investors, it also noted that it will be paying out a minimum of $2.2b in royalty payments to rights-owners throughout the course of the next two years; renegotiating royalty rates in an effort to bring sustainability to the business model must certainly be a priority.

Aside from royalty payments, much of the loss this year was chalked up to over $350m in financing costs, and the company now claims a negative net worth of $242.4m rather than positive net worth of $238m it enjoyed last year.

Staff costs are also increasing steadily year-on-year, with the average annual cost per employee now sitting at $180k, up from $171k in 2015 and $139k in 2014.  Average salaries, meanwhile, rose to $112k, up from the $108k in 2015 that followed a big leap from the $88k average of 2014.

There’s plenty more to pore over in the full report, but with rumours continuing to swirl that the company plans to go public sooner rather than later, moves other areas of the industry – like their new ticketing partnership with AXS Eventbrite, or potential avenues to get music to the platform independent of the major labels – are as important as ever to shore up its profitability.

This article originally appeared on The Industry Observer, which is now part of The Music Network.

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