Apple Music rival Spotify on verge of turning a profit, board member says
Spotify, the world's biggest on-demand music service, could finally turn a profit in 2017, one of its board members said on Thursday.
"Up until now, I think it's been growth, growth growth," Par-Jorgen Parson told Reuters. Parson is a general partner with venture capital firm Northzone, and one of Spotify's first investors. Asked whether Spotify could turn a profit next year, he said it was "absolutely" the case.
Spotify now has a presence in 60 markets, and over 40 million paid subscribers, plus an even larger contingent of people listening on its free ad-based tier. To date though it has posted a loss in every quarter, pumping money into expansion and/or the music licenses it needs to offer content. The company doesn't generate much money from ad-based listeners, and regularly encourages them to upgrade.
While Apple Music has far fewer subscribers -- somewhere north of 17 million in total -- it's thought to be doing well financially. Even if it weren't, Apple isn't dependent on its success, and is likely using the service as a way of keeping people attached to its hardware and software platforms.
Apple is rumored to be considering a temporary 20 percent price cut on its individual and family subscriptions. If so that could dramatically undercut Spotify, which doesn't have any alternate sources of revenue to fall back on.
"Up until now, I think it's been growth, growth growth," Par-Jorgen Parson told Reuters. Parson is a general partner with venture capital firm Northzone, and one of Spotify's first investors. Asked whether Spotify could turn a profit next year, he said it was "absolutely" the case.
Spotify now has a presence in 60 markets, and over 40 million paid subscribers, plus an even larger contingent of people listening on its free ad-based tier. To date though it has posted a loss in every quarter, pumping money into expansion and/or the music licenses it needs to offer content. The company doesn't generate much money from ad-based listeners, and regularly encourages them to upgrade.
While Apple Music has far fewer subscribers -- somewhere north of 17 million in total -- it's thought to be doing well financially. Even if it weren't, Apple isn't dependent on its success, and is likely using the service as a way of keeping people attached to its hardware and software platforms.
Apple is rumored to be considering a temporary 20 percent price cut on its individual and family subscriptions. If so that could dramatically undercut Spotify, which doesn't have any alternate sources of revenue to fall back on.
Comments
...time to go public.
They can't squeeze out more revenue from their paid subscribers because those customers would flee to the competition. Increasing ad revenue means either forcing extra ad time on the free tier (which would cause many to flee) or get higher payouts from the paid advertisers (good luck with that). There's no way that the content license holders will lower their royalty fees -- most of the industry complains it's too low already. Apparently growing the customer base isn't working for them either.
While Spotify might be a nice service, if it can't turn this around it will lose the battle in the end. VC's will want a return on their investment eventually. They aren't gonna keep pouring money into something that isn't going to make money for them, or makes very little.
Time to start an exit strategy....
But how soon until they pay back the BILLIONS in venture capital money they've taken over the years?
They gotta pay that money back, right?
They may have had big capital costs invested that are now paid off.
Now that the infrastructure and R&D is done, they go into maintenance mode and profitability jumps. Good time to invest.
The fact they released Apple Music on android doesn't correlate with that statement.
Spotify can build out their own global distributed network servers, or pay Amazon, Google and Apple for their systems. Sorry, but the absurd one is you.