Spotify guns for global growth, tops $500M in revenue

Expanding around the world, including a major push in the U.S., has put Spotify's top line more than halfway to a billion dollars, but growth mode is widening losses as well.

Spotify house at SXSW 2013.
Spotify house at SXSW 2013. James Martin/CNET
Spotify, the online music service rapidly spreading across the world from its homebase in Sweden, doubled its revenue last year -- but the growth cost it in widening losses as well.

Reuters reported that Spotify's revenue grew to 435 million euros, or about $577 million at current exchange rates, in 2012 from 190 million euros a year earlier. Its losses widened to 58.7 million euros, or about $88 million, from 45.4 million euros.

The privately held company has been growing like a weed. In March, Spotify said it had surpassed 6 million subscribers, a gain of 1 million since December, making it the fastest-growing digital music company ever and second in reach to Pandora. Counting people who listen into Spotify for free, the service has more than 24 million active users.

Earlier this year, Pandora pegged its registered users at 200 million and its active listeners at 70 million.

Both Pandora and Spotify are plagued by the high costs of music royalties. In Spotify's case, the company pays about 70 percent of its sales to rights holders through direct deals with music labels, according to the report. Pandora pays a moderately smaller proportion -- about two-thirds of its revenue -- by taking a different route, opting to pay into a music licensing system that averts the work of striking individual agreements but limits how listeners can control what they hear.

But even with Pandora's bigger scale and lower relative costs, the Internet's biggest radio service also struggles to turn a profit. Since going public, Pandora has only posted a single quarter with a profit.

Correction, 11:32 a.m. PT: This story initially misstated Pandora's royalty costs. The company pays about two-thirds of its revenue to music royalties.

 

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