…from Spotify’s latest financial report for year ending 2013, filed this morning:
Spotify Lost $71.7 Million Last Year…
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Audio-only streaming failed, time to move on.
your major must have been in business….lol
So their losses were much less than 2012, and less than 2011. Seems like they’re heading in the right direction.
lol
Watch out for those ‘adjustments’…
What are the “adjustments” that we should be “watching out” for, Paul? Can you tell us?
As far as I can tell, it seems as though was a normal adjustment for foreign exchange effects and disposal costs. the type of adjustment that is taken routinely. Do you know different?
Oh, and where’s the ridiculously inflamatory headline that completely mis-represents the actual substance of the article, like:
Record Label Demands Are Killing Spotify!!!
or
This Proves That Royalty Rates Are Too High
I mean, you wouldn’t only come up with those types of unsupported, sensationalist headlines, just for the stories that you like, because they help support your biased view on the issue, and try to bury factual reports that help to discredit that view…
…would you?
Well, why don’t we ask Spotify what those ‘adjustments’ were all about? I’m sure we’ll get a very clear, transparent answer.
Actually, the Wall Street Journal already asked:
“A spokeswoman for the company said Spotify restated its 2012 earnings after reviewing accounting procedures to ensure they met global accounting standards. The 2012 loss was much wider than Spotify’s previously stated net loss of €58.66 million.”
Guess is that they need to bring their accounting in line with US practices if they want to IPO. Depending on how they did their books before it could account for a large difference “on paper”.
Seems pretty clear to me. Again, as far as I can tell, it seems as though was a normal adjustment for foreign exchange effects and disposal costs. A type of adjustment that is taken routinely. As they are obviously readying for a possible IPO, they are going to make sure that their books reflect proper standards in every territory where the IPO might be floated. The WSJ article you semi-linked to doesn’t say anything different.
By way of comparison, earlier this month, Citigroup explained an almost $1b “adjustment” to their operating expenses with this um, level of detail and transparency:
“the unexpected increase came from rapidly-evolving regulatory inquiries and investigations, including very recent communications with certain regulatory agencies related to previously-disclosed matters.”
That makes the Spotify explanation of their completely-understandable adjustment look like a sodium pentothal-induced confession.
I’m still wondering what we’re supposed to be “watching out for.” The adjustment already happened, and it has already been explained and booked. What are you saying we should be “watching out for,” at this point?
Also, still waiting for an explanation of why the headline for this article is merely a mild statement of the lede. Why didn’t you sensationalize this headline?
You certainly manage to be a bit more creative with the headlines when reporting on things like Pandora’s executives’ cash-outs, the company’s lobbying efforts and those mis-informed artist ramblings about their royalty statements and how they don’t understand them.
Paul a) likes to practice his sophistry, or b) wants to save face knowing he’s wrong.
Right… definitely seems perfectly clear. And transparent. Which is why you can’t tell me what it is.
Hmm, maybe this Guardian report has some insight:
“Spotify’s net losses after tax may have fallen from €86.7m in 2012 to €57.8m in 2013, but that was largely due to €38.7m of “fair value gains on derivative liability” – an accounting term relating to the value of share options.”
That clears that up!
http://www.theguardian.com/technology/2014/nov/25/spotify-revenues-2013-losses-streaming-music
Paul? Are you REALLY that dumb?
You have to be either really, really dishonest OR really, really stupid, to try and suggest that 1) a report which is ENTIRELY about 2013 revenue results is somehow relevant to 2) an adjustment to 2012 revenue.
The quote form the Guardian article you posted discusses 2103 results. The article doesn’t even mention the 2012 adjustment, at all. Indeed, the only mention of 2012 results (that would be, 2012 results as reported) at all, is merely as a comparitor.
So, which was it: Did you fail to understand that the explanation of net losses after tax being “largely due to €38.7m of “fair value gains on derivative liability” that you quoted was entirely an explanation of 2013 losses – or did you intend to try and misdirect folks?
I’m looking forward to your answer…
Again, the explanation of the Spotify’s adjustment to their 2012 revenue is fine. I’ve already told you what it is – TWICE, now. Here, for the third time:
It apparently was a normal adjustment to comply with international accounting standards, in accounting for foreign exchange effects and disposal costs.
If you really need it, I guess I can repeat it again, typing more slowly, if that would help you…
And again, some of us are STILL wondering what you are suggesting needs to be “watched out for” regarding this now- two-year old adjustment, that has already happened, been booked and been explained. What are you suggesting that we need to be on alert for, now?
as a professional accountant / finance professional…
#1. the re-statement of 2012 financials was due to Spotify having to adjust their financials because they INCORRECTLY reported last year and were liable for fraudulent accounting practices hence their reason for needing to “comply” (FYI their “Spotify Sweden AB” entity still hasn’t filed their 2013 statements and is 5 months past due and are being fined by Swedish officials). It is not an ORDINARY / NORMAL adjustment…it is because they FUCKED UP. One of those big screw ups was in the reporting of a derivative liability related to options that were part of their 2012 equity financing.
#2. Similarly in 2013, they raised additional equity and investors also got the same types of options which created another derivative liability. The fair value gain on both 2012 & 2013 derivative liabilities was then added into their P&L.
So through the magic of accounting Spotify was able to mask increased losses in 2013 (even relative to re-stated 2012).
All in all, Spotify lost ~97M EUR vs. ~87M EUR in 2012. THEIR LOSSES GOT BIGGER…
correction their “Spotify AB” legal entity in Sweden hasn’t filed and is the one that is past due. NOT their “Spotify Sweden AB” legal entity. That entity did file and is the one that this DMN article links to above. 🙂
Add to it losses of revenues at iTunes and Amazon and you will see right direction:
$10B dollar industry in 2015.
This guy is a mad man throwing free music at any one including cement wall and hopping that by some miracle will ricochet CASH at his FACE!
WRONG WAY to IPO Mr. Ek.
Call for free advice at any time.
like any other business…
most small businesses lose money for at least the first 5 or so years…
actually over half of all businesses aren’t even operating any more after the first 5 years…
when will people start talking about big industry and their persons stealing unpublished property and ideas and then using to make gargantuan amounts of money??
when will that finally start making some waves to get cleaned up and fixed??
maybe that will be my redemption and money making avenue, billy clubbing all those people and corporations…
🙂
Seems like everyone that has had proof has come forward to my knowledge and shown what was taken from them. People the don’t just seem to constantly ramble about it. Really a non-issue in my opinion.
One of the tests of a successful business is whether the stakeholders are happy. No one is happy. The royalty structure and rate are flawed disastrously. The artist need to take control of packaging and branding their music. The streaming companies would be better off getting a royalty from the artists. In fact, that is what will happen. And that is also when music goes from spam to gold. That is when the music industry becomes 50 times bigger than what people are arguing over now. I personally love Spotify. I love the user experience. But even the music experience could be eons better if the artists had something more to say about it. And it’s not just about Taylor Swift. Solutions need to be real and positively impact artists at every level. It’s really just about putting a different inventory sharing model inside of Spotify.
Maybe the labels should lower their licensing costs? Since…you know…the artists don’t see a penny of that income.
The more articles you post attempting to shit on Spotify, the more it seems that the problems with them (and probably any other streaming service) are about 80% other entities.
“Maybe the labels should lower their licensing costs”
Haha yeah, that would be a success.
Maybe the deadbeat listeners should start paying a fair price for music instead of expecting to get everything for free. You know, it costs A LOT OF MONEY to create a good record. Despite what the piratistas and the gear pimps say it isn’t something you can do in your bedroom, at least not unless you’re some rare genius and have a hundred grand worth of gear in said bedroom.
…not exactly enough info to determine the fate of the industry mr anonymous…lol
Would be interesting to see their operational costs with 15+ offices around the world…
Looking at what they lost is a glass half full stance. Try seeing how much they paid artists.
Seems like the only ones being affected by these losses are the artist, not Spotify.
I love Spotify. I hear all the new Zep re-releases day-of.
What a shame they don’t have a higher-priced tier for higher bitrates, like Tidal offers.
New York rent was 9.1 million and they have offices in London, Stockholm and Luxembourg.
So, how many millions did Daniel Ek and Sean Parker take out each last year?
How much for their other executives?
Total that and it probably adds up to about, let’s say, $71 million dollars, is all.
Well, good luck with getting those figures out of the linked report!
As far as I can discover, Spotify’s global financial results are only released by their holding company in Luxembourg (why Luxembourg? need you ask? low taxes and minimum disclosure). The latest results from the Luxembourg accounts have indeed just been announced.
The linked report appears to relate only to Spotify’s Swedish business. But that is not without interest. Spotify’s PR spin is that the business will eventually become profitable as it scales and ‘matures’. But it has been going longer in Sweden than anywhere else, it dominates the Swedish music scene, and presumably has little scope for further subscriber growth. So if it isn’t profitable by now, will it ever be? As far as I can make out (with the doubtful help of Google Translate) the net financial result of the Swedish business has moved from a profit in 2011 to a loss in 2012 and a bigger loss in 2013. But it is only fair to add that the ‘rorelseresultat’ (earnings before interest and tax) were positive, and the loss is only after ‘finansiella poster’ (financial items), which could include e.g. interest payments or transfers to head office.
Competition is about to get fierce with Youtube’s new streaming and Beats (deal with Apple).
Seems like Spotify has already passed it’s most profitable window.
Free doesn’t pay anyone – effectively
At what point does the PC police realize that a business of any size has to be sustainable and make money to survive? David suspiciously points out that the are incorporated in Luxe “low taxes and minimum disclosure”. If you were running your own lemonade stand wouldn’t you want to keep your taxes down and your proprietary info secret from your competitors? I know its cool to bash business for looking to make money but how else are they going survive? I don’t think having a altruistic positive message is going to pay their bills. As for the office space etc. you have to offer competitive salary, work environment, location etc to compete for engineers and tech recruits with the likes of Google, Apple, and FB.
I think it will be extremely difficult for Spotify to survive given the large % of revenues they need to pay to out. This number obviously increases as revenue increases so scale doesn’t matter. Seems to me the problem here is the ridiculous royalty and pay structure that the music industry has enjoyed for so long. Of course they are threatened by anyone challenging their cash cow but as many article on DMN have shown, these guys are dinosaurs trying to keep the status quo while people are blowing by them in Tesla’s. If it isn’t Spotify, someone will crack the system and bring about change. I’d like to see it sooner rather than later because the traditional music business model doesn’t work and if they are able to kill businesses like this, we are in for many more years of total b.s.
“I think it will be extremely difficult for Spotify to survive given the large % of revenues they need to pay to out. This number obviously increases as revenue increases so scale doesn’t matter”
‘This number’ (the percentage paid out in royalties) will not necessarily increase as revenue increases. Why do you think it would?
According to Spotify, the percentage is around 70%, which is similar to iTunes or Amazon. As music is what Spotify is selling, it is hardly surprising that it accounts for the majority of their costs.
As for accounting practices, I’m not clear what ‘proprietary info’ you think Spotify is entitled to keep secret. Spotify’s direct competitors (other streaming services) probably know better than anyone else about Spotify’s business already. But the real concern is not what companies based in Luxembourg are hiding from competitors, but what they are hiding from antitrust regulators and tax authorities http://www.theguardian.com/business/2014/nov/05/-sp-luxembourg-tax-files-tax-avoidance-industrial-scale
The traditional music industry worked pretty well until rampant p2p looting.
Spotify pays its executives handsomely and is up to about 2000 paid employees whom it issues regular paychecks. Meanwhile, Spotify pays most rights holders as close to nothing as it can get away with. Some people are making money but we don’t know exactly who, because the transparency would ruin the shell game that Spotify needs to sustain until its IPO.
Say what you want, the revenue ramp rate is impressive. Close to $1 billion in revenues in 2013. And almost $800 million paid to rights holders. Both up over 50% vs. previous year. The company is profit-challenged still, but there’s a real business here, and it makes me optimistic that there will be profits in the future. Most importantly, they’re paying BIG numbers out to rights holders, which is good news. I’m emotionally neutral on Spotify. I am a paying user and like it as a music listener, but their micro payments are not exactly lining the pockets of DIY artists with gold. But this trend makes me hopeful that the payouts will continue to get bigger, and that Spotify will be a viable, sustainable, positive contributor to the music industry.
What you don’t see here is the parasitic affects streaming has on sales. Spotify is not BUILDING anything. It is just sucking the last drops of blood from the industry. It also appears this forum has been infiltrated by Spotify employees. It would be interesting to know who is who here.
Oops, Take That leaves Spotify…
#1. the re-statement of 2012 financials was due to Spotify having to adjust their financials because they INCORRECTLY reported last year and were liable for fraudulent accounting practices hence their reason for needing to “comply” (FYI their “Spotify Sweden AB” entity still hasn’t filed their 2013 statements and is 5 months past due and are being fined by Swedish officials). It is not an ORDINARY / NORMAL adjustment…it is because they FUCKED UP. One of those big screw ups was in the reporting of a derivative liability related to options that were part of their 2012 equity financing.
As a professional finance professional, professional…
I can tell you you don’t seem to be a very good accountant professional.
#1. Of course the adjustment was for an incorrect statement. Would they need to make an adjustment if everything were correct, in your um, professional, professional opinion?
#2. Do you have a source for your assertion that the 2012 adjustment was made to correct “the reporting of a derivative liability related to options that were part of their 2012 equity financing.”?
#3. Are you really suggesting that adjusting for either foreign exchange effects and disposal costs OR derivative liability in order to comply with international standards a big (like, all-caps big) “fuck up” a “big screw up” for a privately-held, Swedish company?
#4. I’m no professional expert professional in Swedish tax law but, generally, if what they did was actually “fraudulent,” as you assert, they wouldn’t be able to merely adjust for it.
#5. Trying to make hay out the fact that one of their entities hasn’t filed in *gasp* a whole 5 months! – means absolutely nothing, other than that you may not be a very professionally savvy professional finance professional.
#6.
The total loss did indeed grow, but the important thing (in they eyes of most professional finance professionals) is that revenue grew FASTER… 2013 revenues of €746.9m (£592.9m) vs. 2012’s €430.3m – a 73.6% gain, while operating losses only rose 16.4% from 2012 to 2013.
This is what professional finance professional professionals would call a clear “path towards profitability.”
RE #1-4: It’s all in “note 4” of their full financials – particularly sections b,e,g. Every single part of it states that they screwed up in accounting for basically every single line item in their financials. You made it seem like its normal to make these adjustments…while some can be normal (like FX) this level adjustments is definitely not and does border on fraud. Likely, given the timing of their original 2012 report, these mis-statements were done on purpose to make their financials look better as they were evaluating a public offering. Also as an FYI, since you keep bringing it up, FX adjustments accounted for a whopping $51K.
RE #5: While this will likely only result in a fine, it is illegal and Swedish authorities technically have the rights to seek liquidation…not that this will happen. The reason i pointed this out is because it speaks to who they are as a company. Not a very professional one 😉
RE #6: While it’s true that losses grew at a slower clip than revenue and does point to a potential path to profit, i was just trying to highlight the fact that they are masking losses to make their financials look better and trick people into thinking that the path to profit is closer than it really is…
Where’s you get Spotifies full financial report for 2012? I’d be interested to read what note 4 says.
Spotify has a very badly conceived business model Who know if the company is sustainable. @ mixley.com