Last week, financial filings revealed cumulative Spotify losses of$206 million, which is burning through available investment of ‘just’ $288 million. But that’s not a concern, according to Spotify CEO Daniel Ek, who responded to the financial situation in an interview with the Wall Street Journal.
Here’s an excerpt.
“Wall Street Journal: You’re making lots of money, but you’re operating at a loss. How long can that continue?
Daniel Ek: “The focus hasn’t really been about when we’re going to show profitability. I think a lot of people just look at the financials and say: ‘Oh wow, losses, that’s really, really bad.’ That’s not at all how we see it, we see that we’ve actually now proved our business model.”
“The difference between what we pay out in royalties and what we actually take in in revenue is increasing, which is positive. [And] we believe that fundamentally this is a huge market. Who on this planet doesn’t like music? What we find is as [people] try out Spotify, above 20% actually decide that they want to pay for the service, which is astounding.”
Wall Street Journal: “Now that more revenue is coming from subscriptions, can you pressure labels to lower licensing fees?”
Daniel Ek: “We’re now the second-largest revenue generator for them in the world after iTunes. So of course we have a lot more to say.
“The biggest hurdle is that the music industry is still built on licensing deal by deal, and that doesn’t really work in this internet world where a song made here in Sweden might be shared with someone in Ukraine.”
On the Artist Backlash.
Wall Street Journal: “Were you surprised by artists accusing you of unfair payouts?”
Daniel Ek: “I’m not surprised, but I’m saddened by it.
“[The move from physical to digital] is the single-biggest shift in the industry since the invention of the recording. We’re selling access, not ownership; that’s something very, very different.
“And, you know, the focus of the artist ought to be how you maximize the number of streams, because that, in turn, will be better long-term for you.”
“But that’s hard for people to understand: All they see is millions of streams, and they see, you know, not millions of dollars in the end, but thousands of dollars, and they think that a million streams is comparable to a million downloads, which it obviously isn’t.
“Sure, you’re going to stream that Rihanna song five or 10 times, but you’re also going to listen to David Bowie’s entire back catalog, which you might not have gone out and purchased. Those are two very, very different behaviors.”
Image by Kristina N, licensed under Creative Commons Sharealike Attribution 2.0.