Freemium proves to be a battle for Spotify

Ad revenue increases slowly while paid subscriptions bring in bulk of revenue

Online music service Spotify, founded in Sweden, continues to grow. In 2011 the company reached revenue of ¬187.8 million (US$233 million), up from ¬73.9 million in 2011, according to a year-end filing from Spotify's parent company in Luxembourg.

However, the filing makes it clear that the vast majority of the service's user base is not bringing in substantial revenue. At the end of 2011 Spotify had 32.8 million registered users, of which 2.6 million were subscribing to one of Spotify's paid offerings. The remaining 30.2 million customers were using the free, ad-supported, service. The paying users, 7.9 percent of the total user base, brought in a whopping 83.5 percent of Spotify's total revenue.

In 2011, the average revenue per user from these paying customers was ¬60, a huge contrast to the average revenue per user from the users of the free, ad-supported service which was ¬0.9.

The good news for Spotify is that the revenue from the paying customers is growing fast, with 300 percent growth from 2010 to 2011. During that same period, advertising revenue grew with a mere 30 percent.

A smaller, but even faster growing, part of Spotify's revenue comes from paid, downloadable content. Spotify sold ¬3.3 million worth of downloads in 2011, compared to just ¬137.000 in 2010.

Spotify saw a net loss after taxes in 2011 of ¬45.4 million, a larger number than the ¬28.5 million loss in 2010. The increased loss is explained by investments in staff, international expansion and engineering.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments