Spotify model is proving its worth as paid subscribers soar

3 Mar 2017

Spotify. Image: Vdovichenko Denis/Shutterstock

Spotify’s paid subscriber count is continuing to rise, with the magical profit mark ever closer for the market-leading music streaming service.

2017 has started with a bang for Spotify, the dominant music streaming service that, to be truthful, is a loss-making machine.

Though loss-making as a term needs explanation: the entire streaming sector has yet to establish a business model that can prove profitable.

For Spotify, though, things could be changing. The Swedish company recently revealed another landmark figure in terms of paid-for subscribers (those that can listen to music ad-free).

Spotify is on an upward trend, recently clocking up 50m customers. It reached the 40m mark last September, and this was at 30m six months previous, meaning it’s growing at 20m every year.

The 30m subscriber figure was nowhere near enough to turn those red digits black at the company, with an 80pc rise in revenues during 2015 (to €2bn) resulting in a €173m loss.

However, adding 66pc more subscribers since then could well change this.

Last month, it emerged that Daniel Ek, the company’s chairman and CEO, was recognised by Billboard as the entire music industry’s most powerful person.

Noting the signs of growth in the music industry (not seen since Napster initiated the copyright-ignoring download craze of the early 2000s), Ek’s management of Spotify is described as a key reason behind the return to the good times.

“Against heavy odds, in 2011, the young, tech-savvy Swede convinced the major labels to invest in and support an on-demand subscription model that included a controversial free tier, arguing that it would curb piracy,” said Billboard.

The subscriber market is quite competitive at the moment. Spotify is competing with SoundCloud, which it was rumoured to be purchasing at one stage last year, Pandora, Apple Music and even YouTube Red.

Spotify’s total subscriber count is around 100m, five times that of Apple. Tidal, a star-led company that exploded onto the scene amid a haze of parties, promotions and all the glitz that celebrity could buy, is thought to be closer to the 1m mark.

Spotify. Image: Vdovichenko Denis/Shutterstock

Gordon Hunt was a journalist with Silicon Republic