Spotify’s losses are increasing, and are now losing millions.
The music service Spotify is far from profitable. On the latest financial statements are showing losses of more than 512 million euros (around 572 million dollars).
Not an excellent rapport, especially not when the much talked IPO is just around the corner.
Looking at Spotify’s latest financial statements registered in Luxembourg they are increasing the Sales with 52 percent in the last year and landed at 2.9 billion euros.
Despite the increase in sales, the loss has also increased. In 2016, the company’s loss landed on 539 million euros. It’s hardly the first time Spotify shows red numbers. But this year, the loss was increased by 133 percent to the previous year.
So what are Spotify saying about this?
As they have said from the first day. “We believe we will generate substantial profits as we increase our reach and our margins will improve as we scale up. Therefore, we will continuously invest in our product and our marketing to accelerate our growth.”
But the question is how long they can use this phrase. The hard reality for any company, physical or online, if you do not start to generate profit, you will not be around.
In March 2016, Spotify borrowed 1 billion dollars to finance its business, and it is the cost of that loan that has increased the loss. Payments to record companies, artists and songwriters are also a significant expense. Of total income, 84.6 percent went there. That figure is lower than in 2015 when the share was 86.2 percent.
Another increase of payment goes. To the number of employees. At year-end 2015/2016, the company had 2 162 employees, that are 500 people more than one year earlier.
Will we have access to Spotify in 3-4 years?
Probably, but the company need to start to generate a profitable business, otherwise, investors and banks will soon close the flow.
To do so, Spotify needs more paying users and cut the costs. It’s estimated that the company have 140 million paying subscribers, and that are double compared with Apple Music. But the big difference is that Apple has a deeper wallet.
I’m on Spotify and have also tried Apple Music that has not impressed me. So I’m hoping that they can turn the ship around, but they need to do it quickly.
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