Spotify recently reported its latest earnings, and the company is down quite a bit from 2014. Even though 2014 was a profitable year for Spotify, users seem to be less interested in this streaming service than they were before.
Part of this disinterest could stem from competitor streaming services, but it’s more likely that people just aren’t interested in streaming music as much as they once were.
Possible Causes for Losses
A number of audiophiles have given up streaming services in favor or old analog sources like records and even cassette tapes. While that bit of information might seem odd, surges in vinyl recordings are especially high, and this could account for part of Spotify’s streaming loss. Another reason might be the competitor companies have started to sprout up including Apple’s new streaming service.
Spotify has a message for streaming services like Apple’s. The company has stated that while mixed subscription services like the one that Spotify offers (free streaming in addition to paid subscriptions) have proven to be profitable while also producing growth, services like the one Apple will offer have not been proven successful. Right now, Spotify still offers a free option to its streaming service, and this is the one that most people are using. Apple, on the other hand, will only offer a subscription option.
The other reason why 2014 was such a good year for Spotify (but 2015 is turning out not to be) is that the company expanded its services to Canada and to the Philippines and Brazil, so user numbers soared based on that expansion. Spotify also signed deals with telecom companies and home audio companies in 2014 helping its expansion and user base increase. Interestingly, only 21% of Spotify’s user base pays for subscription services, and this is where 91% of the company’s income comes from.
If Spotify were to be swallowed up by competitors, that small 21% loss would be devastating. But, Spotify has plans to expand in the future too. There are rumors that Spotify plans to launch a video channel kind of like YouTube, and that announcement should be made soon. While competing with the likes of YouTube will cost Spotify more in the long run, it could also be a way for the company to quickly increase its revenue while also expanding its services.
Will the Competition Take Over?
It’s not likely that Spotify will lose its free subscribers, but the company might see some cut backs where its paid subscribers are concerned. Hopefully Spotify will be able to stay afloat when competing with the likes of Apple and other new streaming companies, but the competition is definitely heating up.
Spotify representatives have stated that they are not concerned about the new numbers pouring in for the first half of 2015, and that the company has a solid model now and in the future. It will be interesting, though, to see how much of a streaming chunk Apple takes out of the market. For now, Spotify remains on top of streaming.