Spotify Lost $78M Last Year Despite $578M In Revenues

Spotify is a streaming music service that launched in Sweden in 2008 and in the U.S. two years ago.  In 2012, Spotify reported $578 million in revenues, which is an increase of 128% from 2011, according to Spotify’s filings spotted by The New York Times.  The company lost $78 million from the year, which is higher than the $60 million loss from the year before.  Spotify has a valuation of around $3 billion.

Spotify has millions of songs that can be streamed for free.  Subscriptions cost around $10 per month.  The subscription eliminates ads and makes the full service available on Spotify’s mobile app.  Spotify is available in 28 markets around the world.  The company hit around 24 million active users back in March and a quarter of them are paying customers.

Spotify pays a fraction of a cent every time a song is played.  The royalties are Spotify’s largest expense.  Spotify’s “cost of sales,” including royalties and unspecified expenses was around $482 million.  That is about 83% of Spotify’s revenues.

This is an improvement over 2011.  In 2011, those costs were at about 98% of the company’s revenues.  Spotify’s marketing and payroll has increased though.  Spotify’s executives said that around 70% of their revenues goes towards paying licensing fees.  These fees are negotiated with record companies.

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