Spotify is one of the more popular streaming music services out there right now, and today it announced that it has over 140 million monthly active users on its service. Despite having such a huge user-base, the streaming music company is still deeply in the red. The company is in the red due to a mixture of listeners not wanting to pay to stream music, and record labels (and artists) wanting pretty high royalties each time a song is played. That is actually the biggest expense for any streaming music service, royalties. Since users are not buying albums most of the time, these days, this is how artists get paid for making music.
In 2016, Spotify posted a net loss of €539.2 million, which was more than double what the company lost in 2015. While its revenue is increasing, its operating expenses are as well, and its unable to keep up. Spotify is actually looking to go public in the near future, which means these numbers are going to be put under scrutiny ahead of its IPO. Although having 140 million monthly active users is a good thing for Spotify, the operating losses are not. Many of the other streaming services that only streamed music, have since gone out of business. The big players these days are iHeart Radio, Google Play Music and Apple Music. iHeart Radio is still in business since it owns a majority of the radio stations around the US. Meanwhile Google Play Music and Apple Music are part of two of the largest tech companies in the US, so there’s enough money to go around.
Spotify has worked to change things up, and add in new features, but it still has not figured out a winning formula. It has added features like a daily mix for finding new music that is similar to music you listen to already. It has also added in features like podcasts and video (although those both took quite some time to make it to Android), which is to get users to spend more time on Spotify and using its service. Which doesn’t necessarily net more profit since Spotify doesn’t show adds to its paying users, but its free tier is ad-supported.