Spotify’s net losses crescendo

Streaming music leader reveals jump in net losses, as launch of Apple’s rival service looms

Spotify's massive net losses have made left concerned about the future of subscription streaming services. The company achieved $1.3bn in revenue but this was counteracted by net losses of $197m

Over the last few years, the music industry has seen a shift away from ownership towards subscription streaming services, with Swedish-based Spotify leading the charge. However, while most in the industry accept the technology is here to stay, there has been concern that firms such as Spotify have yet to turn a profit.

Apple is set to announce its own streaming rival to Spotify in June

The company has managed to achieve a sharp rise in revenue since its launch in late 2008, but this has come alongside continuing increases in net losses – largely as a result of international expansion in both markets served and number of employees. Last week, Spotify announced that, while it achieved $1.3bn in revenue in 2014 (an increase of 45 percent), it had also seen net losses soar to $197m – substantially up on the $68m seen in 2013.

Securing licensing deals in different territories with record labels and musicians is notoriously tricky, and is something many streaming firms have failed to do. Apple, the company that turned digital music into a mainstream alternative to the physical music market, has struggled to secure such deals for its own much-rumoured streaming service. It’s thought labels have favoured rival firms as a means of limiting Apple’s dominance in the market, which it’s enjoyed for more than a decade through its iTunes download platform.

However, Apple is set to announce its own streaming rival to Spotify in June, which will be based on the Beats Music service it acquired last year as part of the larger purchase of the Beats headphones company. This will put much greater pressure on Spotify to limit the losses and try to turn a profit, as Apple already has a huge customer base thanks to its hardware business. It’s thought all iPhones, iPads and Apple computers will be bundled with the new streaming version of iTunes, which will entice people with a free trial before requiring a subscription.

Spotify currently has 15m paid subscribers, but has driven usage through its ad-supported free service, which currently has 45m users. Apple is not likely to offer a similar free service to users, but will have a huge advantage because of the hundreds of millions of iPhones and iPads already in use.

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