Guardian reckons Spotify could go into profit

By | Published on Wednesday 31 August 2011


Spotify could show a small profit when it publishes its next financial results, according to a report in The Guardian. The newspaper cites an expert from Analysys Mason who says he reckons the streaming music service’s revenues increased more than fourfold during the last financial year, and that that could be enough to take the company into profit for the first time. Which would be quite an achievement, given I think we all assumed the digital firm was haemorrhaging cash in a bid to win market share.

The figures quoted by The Guardian and Analysys Mason are that Spotify made in the region of 59 million euros in the last financial year, while it paid 45 million euros to record companies and spent ten million euros on operating costs. Which would, of course, result in a profit. Assuming the money said to have been paid to “record companies” actually includes royalties paid to music publishers, and “operating costs” includes things like bandwidth.

Spotify hasn’t commented on the speculation. If it is already profitable – and that does still seem like a big “if” despite this report – that would presumably allay fears in the music industry that Spotify’s seeming success in terms of signing up users, including paying subscribers, could come to nothing if it turns out the firm’s financials don’t add up when the venture capital runs out.

Though, of course, even if Spotify is already profitable, or looks likely to go into profit in the near future, pessimists might point out that the royalties the service pays into the music industry, while substantial industry-wide, are not enough to sustain individual labels. Also, with the freemium option basically being phased out, the whole thing is arguably becoming a niche product anyway.

None of which would mean Spotify wouldn’t have a long term role to play in the music industry – if profitable, it would remain an important revenue stream – but perhaps it’s not the panacea or iTunes killer that some journalists have in the past suggested.