Spotify – A business where users increase, but only losses?

Deepak Gupta July 27, 2022
Updated 2022/07/27 at 2:48 PM

The Spotify audio streaming service is the one with the most users, with paid subscriptions always increasing. There are currently 188 million Premium users who pay to have access to all advertising-free content and exclusive features.

But if the number of customers increases, why does it continue to make a loss?

Spotify gains premium users at the cost of a huge investment

The company Spotify announced today its financial results relating to the last quarter. If on the one hand the increase in the number of users both premium and free plan is quite positive, the truth is that the company recorded financial losses in the order of 194 million euros.

With companies showing results that mirror the economic recession that the world is experiencing, Spotify is a service that seems to be holding up and even conquering new users. The company reported that it now has 433 million users, a figure that greatly exceeds the 422 million recorded in the previous quarter.

Of these 433 million, 188 million subscribe to the Premium plan, which represents more than 6 million compared to the previous three months.

It is natural that with the increase in inflation and the decrease in family income that the first things to suffer are the subscription plans for entertainment services, but the truth is that unlike other companies with subscription services, Spotify seems to show that is not being affected by it.

Spotify

an uncertain future

However, as he reports, he is aware that the future environment is quite uncertain.

But then, how does it present losses of 194 million euros? The acquisition of new users is done at the cost of a huge investment in marketing campaigns aimed very much at users who let their premium plans expire or at those already premium to expand their family plans.

For the future, in order to balance the accounts, the company expects to increase revenue from advertising and also from subscriptions. In addition, special plans will appear for content such as audiobooks or podcasts.

The company continues, however, to be identified as a poor payer of royalties to musicians, publishers and content creators.

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