Wednesday, October 12, 2011

Spotify loss of £27m on 7 million users

Recent figures from Spotify show revenues of £63m (£45m subscription / £18m advertising) but a £27 million loss. The user base has grown to 7 million in Europe and plans are afoot to expand in the USA.

Given that royalties are paid on a sliding scale the unfortunate question emerges of how this model ever makes a profit ? Or is that very Mrs. Thatcher ? Perhaps the plan is to exit on a valuation linked to a multiple on user numbers but that game only works if you can avoid running out of cash in the meantime.