Spotify has deliberately set its loss-making business model towards rapid growth, argues Castle, keeping its average subscription price (via ARPU) low. He suggests that Spotify’s current payout system – distributing a portion of its revenue to artists pro-rate – is a “grand deflection” from the actual, escalating material worth of the company. They get into business to get their snouts into the trough of IPO stock as fast as possible and share that wealth with as few people as possible.” In a thought-provoking blog on how Spotify is making Wall Street investors very rich while also running a loss-making operation – as many artists puzzle over their royalty statements during the pandemic – Castle writes: “Let’s be clear–companies like Spotify don’t get into business to eke out a profit. This dichotomy – the heavily loss-making Spotify being worth $67bn on the stock market – hasn’t escaped the attention of music industry attorney Chris Castle. In those same nine months, the firm’s pre-tax loss – weighed down by costs related to financing – came in at a whopping €530m ($590m, see below).Ĭonsidering that in its Q3 filings, Spotify projected that it would post a quarterly operating loss of between €32m and €112m in Q4, it seems almost guaranteed that Spotify’s annual operating loss for 2020 will exceed a quarter of a billion Euros.
In the first three quarters of last year, show SEC filings, Spotify posted revenues of €5.712bn (USD $6.36bn), alongside a nine-month operating loss of €224m ($249m). One reason Spotify’s success on the stock market is particularly noteworthy is that, barring a miracle, the firm will once again post a heavily loss-making 12 months for the calendar year of 2020.
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