Spotify, a DRM-based music service that allows unlimited streaming of content from a multitude of major and independent record labels, is struggling to make ends meet. Spotify Limited, the UK-based branch of Spotify that runs its music-streaming service throughout Europe, has reported its financial accounts for 2009, and things don't look good, according to Music Ally.
Last year, the music-streaming company enjoyed revenues of £11.32 million, but endured distribution costs of £608,711, cost of sales equal to £18.82 million, and administrative expenses of £8.29 million. The result was an operating loss of £16.4 0million, and a net loss of £16.66 million after taxation.
Just under 40 percent of Spotify's revenues came from advertising while over 60 percent were from user subscriptions. Spotify ended 2009 with around 7 million users in Europe (after starting the year with just 1 million), out of a total of 10 million users. Only around a quarter of a million of them were paying customers.
"2009 saw us focus on establishing a new and innovative music service and bringing it to millions of people across Europe," Spotify said in a statement. "The groundwork laid in our launch year has been crucial to the significant achievements made in 2010. Further strengthening and expansion of the service remains our top priority."
Spotify may have Sony, EMI, Warner Music Group, and Universal on board, but that's not enough to keep it profitable. The company's desktop application also allows you to import music from either iTunes or directly from local files. Spotify provides an unlimited platform for streaming on the desktop, but the client holds all its music files locked with the program so you can't move it to your MP3 player (though Spotify apps are available). In other words, it's unlimited streaming within a closed environment.
The service is expected to launch in the US at the end of this year, according to one if its investors, Napster co-founder Sean Parker. The company is in the process of securing additional funding, and if last year's report is anything to go by, it's going to need it before it tries to woo America.