UPDATED 11:18 EDT / NOVEMBER 23 2010

Spotify Shows its Holes – Record Losses in 2009

Does everybody remember Spotify? They’re the first music streaming service to hit the iPhone with free tunes—but now they’re making electronic broadsheet headlines because people have started to obsess over their 2009 earnings. Music Ally has gone over the financials for the company in the past year and found some glaring losses: about $26.5 million (figure translated from £16.66 million to USD).

Here are the headline figures. The group’s revenues for 2009 were £11.32 million, but its cost of sales was £18.82 million, plus distribution costs of £608,711 and administrative expenses of £8.29 million.

The result: an operating loss of £16.4 million for 2009 as a whole, and a net loss after taxation of £16.66 million.

That actually looks pretty monstrous on first pass, but we should all keep in mind we’re only a month or so away from rolling away into 2011 and Spotify has held on to its extreme popularity in the UK. In fact, according to a report at GigaOM, the streaming music service is seeing a giant boost in paying subscribers. Since Spotify’s meat-and-potatoes happens to be its subscribers—a model estimate of about 60%—any increase in paying subscriptions bolsters their bottom line.

From the numbers, in 2009 the music survive had 250,000 paying subscribers, which boosted to 650,000 paying subscribers in late October 2010. That an expansion of almost 260% over a year’s time, and the time that we’re missing when guessing at their current financial situation. For all we know, Spotify has crawled out of the red and is looking at actual solvency. The real takeaway from all this? It looks to the streaming music industry that 2011 will be an even bigger year than 2010.

Spotify is already hooked into the UK population with extreme popularity. It’s already available for Android and iPhone and they have a webOS client underway. This year they also received extra investment and direction from Napster’s co-founder, Sean Parker, to the whistle-worthy tune of $14.86 million in August.

It’s doubtful, even with the flagging 2009 numbers that the service is still walking wounded.


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