This is either good news or bad news, depending on where you stand. But according to financial filings just shared with Digital Music News, Spotify appears to be approaching profitability in Europe. The company drastically narrowed its losses in 2011, thanks largely to increased subscriber rolls. Specifically, operating losses in the UK-based 'Spotify Ltd' narrowed to 2.06 million pounds ($3.35 million) for the year ending December 31st, 2011, a major improvement over a year-2010 loss of 26.5 million pounds ($43 million).
This is actually broader than just the UK. Instead, these filings count all European properties through May of 2011, but that makes it more difficult to get the full picture. What remains is a 2011 statement split between the UK and Contintental Europe, and we don't have access (yet) to the 'Continental' part. Judge this accordingly.
There may be some shady accounting to consider, as well (after all, this is Spotify). Among them is a 'gain on sale of intangible assets' of 24.4 million pounds ($39.6 million), which turns out to be an internal sale of technology and trademarks to parent group Spotify AB. That produced a handsome, pre-tax profit of $21 million pounds ($34.1 million), but that's sort of like claiming a profit after selling your laptop - to yourself.
The bigger story is that revenues are getting boosted by ramping subscriptions. And paying subscribers are worth a whole lot more.
The complete financial filing is here.
Eurotrash Friday, September 28, 2012
Face it !
Spotify will grow past iTunes and end up getting expelled from iphones just like google maps just was. Spotify is a superior product for modern consumers. Only problem is they will soon have an itunes like monopoly.
Satan Friday, September 28, 2012
You mentioned Google and Apple?
My young protege spotify has a lot to learn from these two about crushing opposition
Jeff Robinson Friday, September 28, 2012
If only Spotify sounded like PONO.
FarePlay Friday, September 28, 2012
What we're missing is the licensing fee / payout increases. Am I just missing it?
Paradox Friday, September 28, 2012
2009: $18 mil revenue
2010: $99 mil revenue
2011: $236 mil revenue
2012 projected revenue: $889 mil
it's definitely a fast grower.
Too bad, it won't likely surpass Muve Music subscription # in the USA. Muve Music will surpass Rhapsody # in the USA by the end of this year.
Casey Friday, September 28, 2012
Muve is growing pretty fast. But they don't have near as large of a potential subscriber base. So eventually they will be overtaken unless Muve spreads to other carriers.
@mattadownes Friday, September 28, 2012
Once Apple sees the tail on downloads, they'll open a major competitor to Spotify. Spotify is not the be all end all in streaming.
HansH Friday, September 28, 2012
According to this article there is a profit:
Oryx Friday, September 28, 2012
They say exactly the same thing, read deeper : the overall profit comes from a 24M internal revenue transfer from the parent company
sosmithjr Friday, September 28, 2012
I'm curious to know how they are reflecting the royalties they pay on the free users. It looks like these are in the "Cost of Sales" number (which would be good) because none of the cost numbers farther down look big enough. If so, that means they are getting a 14% margin after those are expensed and that their subscriber and ad revenues are more than offsetting the costs of the free users (their main marketing cost). If this is the case, they have plenty of margin on their sub/ad business to cover their marketing costs and should be able to turn an operating profit as their premium subscriber base continues to grow. That's encouraging and would put to rest the debate about whether their business model is sustainable -- at least in the UK.
If the content costs for free users are reflected lower down, however, that's bad. If they hope to continue to drive adoption using the free service, they will need much better than a 14% margin on their sub/ad business. As mentioned above, the numbers down lower look too small to capture these royalty costs unless the free usage has dramatically decreased. If that's the case, then that's concerning because they aren't attracting/engaging the free users and their organic subscription growth will likely slow dramatically as well because they have fewer free users to upgrade. In order to maintain subscription growth, they'll need to rely on more traditional marketing and bundles for subscriber acquisition, which will put even more pressure on their margins and they may be forced to drop the free offering altogether at some point. And what will Facebook think of that?
Also, I wonder what's captured in "Other Operating Income"?
Supers Saturday, September 29, 2012
Keep in mind that Spotify is NOT FREE anywhere outside US. UK and France have a 5 play limit per track which completely kills the free service and other non-US countries have a 10 hours/month limit.
ADDAMBONGGtheband Tuesday, October 02, 2012
.. but if music is free .. never mind .. would spotify post my shit too?? ADDAMBONGG .. google us