Spotify’s financial woes have long been the source of speculation as to the long-term viability of the company, and in the previous financial quarter, Spotify had noted that their user base had increased to 515 million monthly active users.
Compared to the most recent report of 551 million active users in Q2, Spotify isn’t haven’t trouble with attracting new listeners. Still, Q1 saw Spotify post a loss of $248 million, so at least it looks like the operating loss is decreasing. Spotify probably hopes that its latest price hike will help alleviate this problem, but as mentioned earlier, the entire business model might be to blame.
The Concordia Business Review believes that the biggest problem with Spotify is the free tier of the service. Not as many people may be motivated to pay for Spotify, and that they have little reason to do so since there aren’t exclusive on the paid version of Spotify. Paying for Spotify simply removes the ads that occasionally play between songs and allows you to download songs offline.
A report from Nasdaq paints an even grimmer picture, saying that music streaming is a low profit margin business model that is great for listeners and artists, but not for shareholders — and that Spotify usually posts a loss regardless of growth and scaling. Spotify walks the razor’s edge between profit and loss, and the recent price hike might be economic triage.
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