Music streaming service Spotify has reported an 80% increase in revenues to €1.945 billion in 2015 as its user base swelled and it expanded in new markets, a filing showed. With ads played to users on the free tier of Spotify, advertising revenue rose 98% – almost doubling – to €196 million. “In many ways, [2015] was our best year ever”, the company said in the filing.
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According to a financial filing made in Luxembourg, Spotify’s losses rose previous year, but the pace of this growth slowed enormously to 6.7 percent.
In terms of Spotify’s total $2bn+ income (negligible “other” revenues aside), ads therefore claimed 10.1% – an improvement on the 9.2% share seen in 2014, but another reminder of how heavily the company relies on people paying for premium accounts.
Spotify makes the bulk of its money through subscriptions, which brought in £1.34 billion last year, representing an extremely healthy growth of 78 percent on the year before.
The company said it had 89 million users by the end of 2015 – up from 60 million a year earlier – of whom 28 million were paying for subscriptions.
Spotify itself admits the financial drain of its free tier: “Free user models, whilst scaling, have not proven a path to profitability”, the company’s board of directors wrote in a note to shareholders attached to the Luxembourg filing.
The company predicted that as it continued to expand, profit margins would benefit. “Spotify has the combined power of both”.
Spotify, long at the forefront of online music streaming, said it was prioritising investment, as it faces increasing competition.
The company paid $9.4m for SEEDSCIENTIFIC, the audience intelligence platform it acquired in JUNE past year.
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And it warned: “If we cannot maintain Spotify’s culture as we grow, we could lose the innovation, teamwork and focus that contribute crucially to our business”.
