Music Streaming Service Spotify Hits 180 Million Users But Loses Money

Swedish streaming giant Spotify continues to gain new users and subscribers yet fails to earn a profit. Rolling Stone reported the company’s net losses and operating losses as significantly greater than last years. Reportedly peaking at 180 million users at the end of the quarter, the company reported record net loss of over $460 million and a operating loss of more than $105 million. Spotify attributes the high operating loss on the expense of entering the New York Stock Exchange and unexpected high social costs. According to a press release, Spotify claims these extra costs are due to “employee benefits and salaries and stock-based employee compensation.”

In April, Spotify finally made its debut on the New York Stock Exchange, entering as a direct listing. Meaning, no new stock was issued and only those shares held by private investors would be sold. While stock prices have remained stable, Spotify has not earned a profit since its launch in 2008.

Spotify is a tiered streaming service, offering free subscriptions that are Ad-supported and a premium subscription for a monthly fee. The paid subscription removes ads and increases the bitrate of the song, generating the most revenue for the company. Spotify continues to gain new users of both the free and paid subscriptions, but at a slow pace.

Unlike other streaming services that pay artists a fixed rate for each song, Spotify pays royalties based on the number of streams the artist has. Spotify claims it’s profit loss is partially due to the high royalty rate.

Recent lawsuits and Spotify’s Hateful Conduct Policy have also caused trouble for the streaming giant. In May copyright lawsuit was settled for over $43 million, that alleged nonpayment for compulsory licenses. Spotify later removed their Hateful Conduct Policy after much backlash from recording artists.

Other streaming services have kept a close eye on the company’s stock market success. According to Billboard, several other companies have recently filed for their own IPO’s. While most analysts remain skeptical about the level of success Spotify will gain with their stock market entry, many agree that Spotify’s continued growth will prove profitable in the future.