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Spotify triples losses in under 2 years

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Brett Smith for – Your Universe Online

Many critics took shots at the music streaming service Tidal’s high-profile launch and subscription-based business model, but a new report on one of Tidal’s competitors could be a damning blow for the entire concept of a music streaming service.

According to a recently released financial document, Spotify has tripled its reported losses since 2013, losing $197 million last year.

The document claimed “product development, international expansion, and general increase in personnel” were the reasons for so much red ink. The silver lining is that Spotify also brought in a ton of revenue last year, more specifically $1.3 billion.

Currently available in most developed countries, Spotify’s business model is based on a two-tier system. For $10 per month, US subscribers have advertisement-free access to the company’s entire music catalog, which includes music from most major artists. Users can also access that catalog for free, but non-paying users must listen to ads every few songs, (really killing their vibe sometimes).

According to Spotify documents, the company had 15 million paying users and 45 million free users at the end of last year.

The report of million-dollar losses comes just as Spotify is preparing to roll out a video streaming service that could become a valuable revenue source to offset some of the company’s losses. Spotify has also said in the past that it will become profitable once it reaches a certain number of paying customers.

An anti-Spotify bandwagon

In addition to massive losses, Spotify also has to contend with the perception that its model isn’t artist-friendly. The streaming service has come under criticism from artists across the musical spectrum, from Radiohead’s Thom Yorke to Taylor Swift, who recently pulled her entire catalog from the service.

Jay Z and others recently jumped on the anti-Spotify wave by re-launching the streaming service Tidal as an “artist owned” endeavor.

The relaunch event featured a who’s who of music industry celebrities, from Daft Punk to Jack White. But using millionaires as the face of a company trying to get people to pay for what can mostly be gotten for free may have backfired, according to redOrbit writer Shayne Jacopian.

“While the streaming app briefly made it into the U.S. iPhone top 20 app download chart, only two weeks later it wasn’t even in the top 700,” Shayne wrote in April.

Jay Z’s got 99 problems, and his new music streaming service, Tidal, is probably the biggest.


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