At the height of music streaming, one of the industries biggest players, Spotify, has reported over $250 million in losses over the past two years. What has been the cause of this, and what does the landscape look like? Brand Agency’s Junior Strategist, Camille Whitehead, explores Spotify’s predicament.
Turns out that music isn’t the only thing that is streaming out of Spotify. Last year the online music start-up reported a loss of $197 million, which is a drastic increase from its 2013 loss of $68 million. In the last year, Spotify brought in $1.3 billion in revenue, and has alluded to making an entrance to the video streaming market. This move could bring about more advertising opportunities which would help alleviate losses.
Spotify attributed the $197 million loss to costs associated with product development, expansion and licensing. Spotify has long ascertained that it would be able to achieve profitability once it reaches a certain number of paying customers, however as its losses seem to grow as it brings in more money counters that claim. Spotify now boasts 60 million total users, 15 million of which pay for the service.
The services free streaming has become an issue recently with Taylor Swift publically pulling her music from Spotify in late 2014 in protest, claiming that the service does not adequately compensate artists. Spotify asked Swift to return to Spotify, and it has since become clear why; Spotify needs Swift more than Swift needs Spotify. To add fuel to the fire, the number of competitors has grown with Jay-Z’s Tidal recent launch and Apple’s unveiling of Beats.