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Spotify Passes 140 Million Users, Promises to Pay Labels $2 Billion as Losses Widen

Spotify passed 140 million worldwide users as both its revenue and operating loss grew significantly in 2016, according to the company’s annual financial statement released Thursday morning. The company is expected to list itself on the stock market this or next year.

The company did not say how many of those were paid subscriptions; in March, it said it had reached 50 million. Its closest competitor in the streaming market, Apple Music, announced earlier this month that it had passed the 27-million subscriber mark.

The company also said it will pay record labels at least $2 billion over the next two years. Spotify inked licensing deals with both Universal Music Group and the independent label collective Merlin earlier this year; it is still negotiating with Sony Music Entertainment and Warner Music Group.

Spotify showed an operating loss of some 349 million Euros ($389 million) compared with a 236 million Euro loss the previous year.  Its gross profit was just $502 million. “This is explained by substantial investments that have been made during the year, mostly in product development, international expansion and a general increase in personnel,” directors Daniel Ek and Par Jorgen Parsson wrote in the filing.

It also cast a cautious eye on its future financial prospects. “Streaming music is an emerging market, which makes it difficult to evaluate our current and future prospects,” the filing continues. “We face strong competition for users, listening hours and advertiser spending, and we face competition from players with substantial resources at their disposal,” it reads, clearly referring to Apple, Google and Amazon. The filing It then speaks of its need for licenses from rights holders and recruiting and retaining qualified personnel, or else “our ability to successfully grow our business could be harmed.

“If we cannot maintain Spotify’s culture as we grow, we could lose the innovation, teamwork and focus that contribute crucially to our success.”

Still, Spotify remains the service to beat amid fierce competition from Apple Music, Amazon and YouTube, and to a lesser extent Tidal and Deezer. The major labels are said to own approximately 18 percent equity in Spotify, which to a large degree unites their prospects for success in the streaming market.

 

 

 

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