Spotify announce big 2009 losses, but does it matter?

Share

Thumbnail image for spotify header.jpg
Spotify have revealed their financial accounts for 2009, and it makes for a very interesting read indeed.

Spotify Limited, the UK based arm of the music streaming service which also acts as the company’s main sales body, revealed 2009 revenues of £11.32 million, with cost of sales at £18.82 million, distribution costs of £608,711 and administrative expenses of £8.29 million.

It adds up to an operating loss of £16.4 million, and a net loss after taxation of £16.66 million.

Spotify spoke to Musically on what the figures represent: “2009 saw us focus on establishing a new and innovative music service and bringing it to millions of people across Europe. The groundwork laid in our launch year has been crucial to the significant achievements made in 2010. Further strengthening and expansion of the service remains our top priority.”

Any start-up faces a difficult launch year, and for the many millions of Spotify fans, further figures do offer some hope that the service will proove sustainable before long. In particular, user numbers are very impressive indeed.

Spotify started 2009 with around 1,000,000 users, but by the years end were reporting a sevenfold increase in users, up to 7 million. Of these, 250,000 were paying subscribers, a conversion rate of 3.57%. These paid-for members made £6.81 million for the company, while the ad-funded model made £4.51 million.

As of October this year Spotify claimed to have 10 million users. While the number of sign-ups to the had service slowed, the percentage of conversions to paid-for members against freebie users increased, with some 500,000 users now paying to stream music add-free and on the go.

Using the figures as a rough estimate, without taking into account inflation and the fluid nature of a growing userbase, and also assuming a continued two or three-fold growth until the end of the year, Spotify could have as many as 15 million users by the end of 2010, with as many as 750,000 to 1 million paid users. That would give £14,592,857 from the ad model, with £18,040,400 from subscriptions for a grand total of £32,632,857. Which looks far more healthy.

And Spotify being the great service that it is, who’s really going to turn their back on it once they’ve trawled the humungous catalogue for playlists and albums? It’s the sort of app that, once you tried it, you can never imagine how you lived without it. As far as my music-obsessed circle of pals are anything to go by, Spotify and cloud streaming is the future of music consumption, and a service that they’ll loyally use and pay for.

Of course, it’s hard to gauge these things, especially with an imminent launch of a US service. It’ll bring in a fair few quid more if a success, but further costs to rightsholders (of which they’ve already paid £40 million) will dent this. And then of course there is the looming shadow of the long-rumoured iTunes cloud streaming service which could lure users away back into Apple’s walled garden.

Still, don’t let the headlines fool you, it’s not nessecarily all doom and gloom in camp Spotify.

Gerald Lynch