June 10, 2015
Spotify: We Have More Than 20 Million Paying Subscribers
Sweden’s music-streaming service Spotify has passed 20 million paying subscribers out of 75 million active monthly users.
The company’s total number of paying users is rising quickly, having shot up some 33% since the end of 2014, when it had 15 million users paying $10 per month to use the premium service.
Spotify said on Wednesday that the growing numbers of subscribers means that artists will get bigger payouts than before as a function of the company’s revenue sharing payout structure.
As an example, Spotify said that “a global superstar” who received $7.7 million over the 12 months starting in June 2014, when Spotify had 10 million subscribers, is now projected to receive $13.9 million in payouts over the next 12 months, given the new subscriber baseline.
The company said that it in total has paid more than $3 billion in royalties, of which $300 million was paid in the first three months of 2015.
As Apple details its own streaming music service ahead of an imminent launch, incumbent industry leader Spotify is building its defenses against the oncoming onslaught, turning to international investors to strengthen its financial position. The Swedish streaming service yesterday closed a $526 million funding round, an influx of cash that The Wall Street Journal says brings Spotify to a valuation of $8.4 billion, up from $5 billion last September.
SPOTIFY IS NOW VALUED AT $8.4 BILLION
Spotify began this latest funding round in early April, and was originally seeking $400 million to reach a valuation worth double that of competitor Pandora. The successful round means that Spotify has now pulled in more than $1 billion from investors, but even with that influx of money and 15 million paying subscribers, Spotify’s future is not entirely secure. The company’s business model means it still operates at a loss — the Swedish firm has to pay almost 70 percent of its revenue to label owners and musicians for rights and royalties.
The half-billion dollars taken during during this funding round show that the business world still believes in Spotify, but it will need to either renegotiate how it pays labels, or start convincing more of its 45 million free users to part with their money if it wants to stay on top in an increasingly crowded marketplace. The company is already attempting to diversify by adding videos and podcasts but its competition is growing too. Established competitors such as Rdio and Pandora are still fighting for users, while new entrants backed by big names, such as Jay Z’s Tidal, enter the fray. Above them all looms Apple, whose entry into the market was met with a flippant tweet from Spotify CEO Daniel Ek.