Spotify is the second largest revenue source for record labels

By on June 26, 2012, 12:00 PM

A source close to Spotify claims it is the second largest revenue generator for major music labels. The service was used by 23 million people last month and is bested only by Apple’s iTunes, according to a story published by Business Insider.

The publication estimates that iTunes paid around $3.2 billion to record labels last year, a figure that is surely much higher than what Spotify’s member base is coughing up. But second place is nothing to be ashamed of after launching in the US less than a year ago. Early Spotify investor Sean Parker noted at SXSW earlier this year that if the business continues to grow at the current rate, they should overtake iTunes with regards to contributions to artists in less than two years.

The streaming music service is in the process of raising $220 million based on a $4 billion valuation, including $100 million from Goldman Sachs. This is in addition to the $100 million that was generated last year but not everyone is fully convinced about the future of the service.

Some investors were skeptical a few months ago given the fact that Spotify doesn’t actually own the content they sell. As such, record labels will be watching the company very closely and it’s a given that they will tax any profits to a great extent.

On the flip side, some see Spotify as a great alternative to iTunes, the latter of which is viewed as too powerful by many labels. With any luck, these labels will be able to depend on Spotify as a steady source of income which could give them leverage at the negotiating table in the long-term.




User Comments: 6

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Guest said:

The valuation of $4B is based on losing operating profits. Not sustainable.

alcarin2030 alcarin2030 said:

Funny, seeing how MOG.com is multiple times better than Spotify.

dynomike dynomike said:

Funny, seeing how MOG.com is multiple times better than Spotify.

funny how mog is USA only.... spotify and iTunes is Europe as well.

TLDR: we cant use mog if we dont have it. so

wastedkill said:

Funny, seeing how MOG.com is multiple times better than Spotify.

How is mog multiple times better than spotify when its ONLY available in the USA so that means less profit, less users and overall less competition.

alcarin2030 alcarin2030 said:

How is mog multiple times better than spotify when its ONLY available in the USA so that means less profit, less users and overall less competition.

Spotify's 192kbps vs MOG's 320kbps. $5 for unlimited MOG vs $10 for unlimited Spotify.

wastedkill said:

Spotify's 192kbps vs MOG's 320kbps. $5 for unlimited MOG vs $10 for unlimited Spotify.

You do understand spotify has 320kbps bitrate right? not only that spotify and MOG has both $5, $10 plans so dont try to mislead everyone. The only thing I can see is that spotify has a few mill more songs and a lot more subscribers which = more revenue, spotify is also available in the whole of Europe, UK, USA which makes spotify the top competitor right now until MOG comes worldwide.

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