Spotify Payments To Music Industry Up 85% To $1.8B Last Year
80% revenue growth would be cause for celebration at almost any company. But Spotify isn't just any company. Growth means greater expenses for the music streamer and last year, which they are calling their "best year ever," Spotify suffered a $194 million loss while paying 84% of total revenue to the music industry.
The Highlights
• Spotify has revenue of $2.18 billion in 2015 – and 80% jump in income from the previous year
• Net losses were a significant $194 million lats year but grew at just 6.7% over 2014
- Advertising revenues was 98% in one year to to $219 million
- Subscription revenues grew 78% to $1.95 billion
- Total payments to the music industry ("royalty, distribution and other costs") were $1.83 billion in 2015, up 85% from 2014.
- 84% of total 2015 income went to either direct payments or the cost of tracking and making those payments.
Analysis
Here's how Spotify see its future, according to the financial report filed in Luxemborg: "Music has mass market appeal – and, as such, we believe we are just at the beginning of a much larger market opportunity, benefiting from significant first mover advantages… Subscription-only models have not yet proven scale and free user models, while scaling, have not proven a path to profitability. Spotify has the combined power of both."
It is true that these financials, first reported by MBW, are generally good news for Spotify. But they are bad news for a music industry hoping to extract higher payments from the music streamer.
Losses of less that 10% of total revenue point to a more hopeful future for the company. But if 84% of total revenue is already being paid to rights holders, how can Spotify be expected to pay more?
Total payout to “music industry” is irrelevant; the important variable is: What are the payouts per stream?
Sasha: no its not. Do you want 1$ for 2 streams or 0,01$ for 1 billion streams?
Its basic math.
“84% of total 2015 income went to either direct payments or the cost of tracking and making those payments.”
That doesn’t equate to “84% of total revenue already being paid to rights holders” if it includes operational costs. Exactly what percentage of total income was directly paid to artists and labels? In a digital world with full analytics available, why should tracking and making payments cost so much? Spotify is spinning its lack of efficiency to make it sound like it’s being more generous to artists. Not cool.
” But if 84% of total revenue is already being paid to rights holders, how can Spotify be expected to pay more?”
By charging more, of course. They undercharge for the privilege of unlimited music.
Instead, create subscription levels at difference price points based on how much music the listener is allowed to stream per month. This will allow setting minimum pay-out rates.
Unlimited streaming at a low fixed price is an unsustainable and exploitative model.