Spotify UK Is No Longer a Profitable Business

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It was the shining beacon of light that Spotify loved to point to: a profitable, growing British division.  But Spotify’s once-proud, once-profitable UK operation is now in the red, with potentially huge implications for the company and the broader streaming music industry.  According to financial filings obtained by the UK Companies House this (Wednesday) morning, the critical Spotify subsidiary lost £1.21 million ($1.87 million) in the previous year, despite substantial increases in both advertising and subscription revenue.

And, despite seemingly-healthy profits of £2.57 million ($3.97 million) in 2013.

The subscription gain, while a positive development, is the most worrying part.  According to the filing, Spotify’s UK-based subscription revenue improved 29.6 percent to £119.2 million ($184.3 million), an enviable gain by any measure.  Advertising-based, or ‘freemium’ revenues, gained a more modest 8.6 percent to £92 million ($142.3 million), with a continued shift towards smartphones as a primary driver.


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Looking at 2015 and into 2016, the pressing question is whether Spotify can ever return to profitability.  So far, the signs are troublesome: according to global financial details filed in Luxembourg earlier this year, Spotify’s 2014 net losses topped a massive €162.3 million ($186.2 million), on revenues of €1.08 billion ($1.24 billion).

12 Responses

  1. Anonymous

    If you think a profit of £2.57 million on a revenue of ~ £131.4 million is healthy….

    Spotify is in bad shape financially and will be for a while. It took Amazon forever to turn a profit. Spotify will get there eventually.

    • Paul Resnikoff

      There’s a significant lag in filing, so these documents only became available to us this week. Accordingly, we only now know the financial situation, and its shift from profitability to loss.

  2. cuz

    You can see exactly why they’re in the red – the tax breaks they got in 2013 no longer applied.

    Sure they knew this was coming – great non-story, folks!

  3. Ariel

    Lots of growing tech companies lose money. The question with Spotify is will it scale. Can it hit like hundreds of millions or a billion users. If it can, the losses now are whatever.

    • FarePlay

      Good morning Ariel. We’ve been hearing this scale argument forever. The real question becomes are overinflated earning projections that attract investment capital at the expense of the rest of the industry a good thing?

      What is the legacy if they succeed or fail? Take a look at the extreme consolidation of successful artists. While more music may being produced than ever before the disparity between who can’t and can make a living making music is wideniing.

    • The effort award

      If you scale up net losses doesn’t that mean larger scale net losses?

  4. DavidB

    The increase in administrative expenses is a bit of a shocker, because this ought to be relatively constant. (Compare it with distribution costs, which actually were almost unchanged despite a large increase in ‘turnover’.) The only way a streaming business can ever make a profit is to keep down its staff and overhead costs as volume rises.

    The other striking point is the tax charge. I don’t know what this covers. In the UK, corporate income tax (corporation tax) is charged on profits, not revenue, so if a company is making a loss, corporation tax should be zero. Tech companies like Facebook and Google fiddle their balance sheets so as to pay virtually no corporation tax. In 2014 Facebook paid precisely £4327 in UK corporation tax – I’m not kidding. So if Spotify paid nearly £3 million despite making a loss, they either have a very bad accountant or a very good one. I suspect the latter: they have found some advantage in paying this level of tax.