Spotify continued to lose money during 2014, although financial analysts still suggest that this isn't necessarily a bad thing...yet. The Swedish streaming company had its highest revenues ever during the last financial year, yet it posted overall losses of more than $185 million. So what's the story?
Business, of course, often requires you to dig a hole before you can take the dirt unearthed and build a mountain out of it. For Spotify, that includes rapid expansion and improvements, which cost more money than the company is bringing in at the moment. The company posted losses of $113 million and $90 million during 2013 and 2012, respectively (from Billboard).
That hasn't been for nothing however. The company's revenue increased to $1.22 billion during 2014, an impressive 45 percent rise on its numbers from the previous year. That money has gone to pay for expansion in new markets and in the office, as Spotify added nearly 400 new employees during the last calendar year (more than a 33 percent increase). That reflects confidence on behalf of executives.
Corporate investors seem to agree with the sunny outlook over at Spotify. The company recently revealed that it had raised another $350 million in funding, raising its total funding to $887.8 million and the total valuation of the company to $8 billion.
Theoretically, the company should be able to start easing back on its spending, while revenues will continue to rise, finally resulting in a net profit for the company. One factor the company will need to work on is converting its casual users to subscribers. Spotify uses a "freemium" model in which 75 percent of its 60 million users listen for free, with occasional advertising. Although the ads bring in revenue, more than 91 percent of the company's revenue comes from subscribers.
Although analysts predict big things for Spotify, we can't forget that the streaming giant has never turned a profit. That may change soon enough.
