Spotify’s 2012 Revenues More Than Double, Net Losses Increase Indicating Workable Business Model

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From Billboard:

Spotify, the world’s largest music subscription service, more than doubled revenue in 2012 to over $573 million. Although the company lost slightly more money than it did in 2011, there are signs its business model can be sustainable. Numbers from the company’s financial statements, filed in Luxembourg, were reported Wednesday by the Financial Times.

Revenue grew 128% to $573.1 million (€434.7 million) in 2012 from $246.7 million (€190 million) in 2011. The company’s growth continued to drag on the company, however, as net loss increased to $77.4 million (€58.7 million) from $58.8 million (€45.4 million).

But the numbers indicate Spotify’s business model could work. For this to happen, the company must be able to operate on whatever is left after paying rights holders. As Spotify generates more revenue, and as its business model takes shape, it will keep a greater share of its revenue. Indeed, cost of sales fell to 83.5% of revenue in 2012 from 97.7% in 2011. This means Spotify kept more of every dollar it generated last year to cover salaries, I.T., marketing and other corporate expenses.

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