Spotify swings to profit thanks to subscriptions
SPOTIFY, the music streaming service headquartered in London, swung to its first profit last year as it signed up more users to monthly subscriptions and reduced its reliance on advertising.
The privately-owned company, founded by Swedish entrepreneur Daniel Ek in 2006, saw a profit after tax of £21m in 2011, compared to the previous year’s £26.5m loss, according to accounts filed with Companies House.
The move into profit was caused by a 51 per cent rise in turnover to £95.5m, with sales of monthly subscriptions to the service accounting for most of that rise. Spotify, which charges £5-10 a month for unlimited song streaming or places adverts in between songs on free accounts, saw subscription revenue rise from £45m to £72.5m while ad sales rose slightly from £18m to £22m.
The service has introduced extra measures in recent years to encourage non-paying users to sign up for subscriptions, as it failed to support itself with advertising.
“The company’s primary focus is to continue its rapid growth and consolidate the business within a fast-moving industry,” Spotify said. “It is crucial that Spotify continues to penetrate existing and new markets as quickly as possible.”
Spotify launched in the US in July last year, a move that has seen it double its number of fee-paying customers from around 2m a year ago to more than 4m this year. It now operates in 16 countries and has promised to continue its expansion.
Music streaming is the biggest source of growth in the music industry as physical sales decline. Global revenue from subscription services is set to increase by 40 per cent this year according to research firm Strategy Analytics, compared to a nine per cent rise in digital downloads and a 12 per cent decline in physical sales.