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CNBC

Spotify lost more money than ever last year, but its performance still topped 2014's

While the service's losses last year were up 6.7 per cent, revenue was up 80 per cent

PUBLISHED : Tuesday, 24 May, 2016, 5:35am
UPDATED : Tuesday, 24 May, 2016, 1:24pm

Spotify lost more money in 2015.

And its managers and investors are probably very happy about that.

That's because the music streaming service's revenue increased much faster than its losses — something it hasn't always been able to say.

Given that Spotify has told its investors it is headed for an IPO in the next few years, it's the kind of performance it will need to be able to replicate with consistency.

Filings show that Spotify, based in Sweden and the U.K., generated revenue of US$2.12 billion last year, up about 80 per cent from the US$1.18 billion it brought in the prior year. Losses, meanwhile, hit US$188.7 million — but that number was only up 6.7 per cent from the previous year's total of US$176.9 million.

That's a much, much better performance than 2014, when Spotify's losses ballooned by 289 per cent, and its revenue was only up 45 per cent.

As in the past, most of Spotify's revenue comes from its subscription service, which now boasts more than 25 million users worldwide. And most of that money goes right back out the door to music labels, artists and other music rights-holders.

If Spotify can keep it up, then it will have pulled off something special by showing it can run — and grow — a streaming music service at scale. Traditionally, streaming music services have struggled because their music expenses increased at the same pace as their growth — or even faster than their growth.

There are still lots of ways for Spotify's expenses to balloon, though. It is in the midst of negotiations with big music labels, who may want a big upfront check to continue using their music (though the labels themselves have equity stakes in Spotify). And Spotify is planning a push into video, which is a good way to burn though cash quickly.