Spotify on Thursday said it now has more than 140 million global monthly active users. Combined with the admission that it had 50 million paid subscribers back in March, it’s safe to deduce that around 90 million or so of its listeners utilize the free tier.
In a separate financial filing, it was revealed that Spotify’s revenue for 2016 totaled nearly $3.3 billion. While that may sound impressive at first glance, one must also consider that Spotify’s “cost of revenue” was just over $2.75 billion which leaves a gross profit of just north of $500 million.
While not specified, the “cost of revenue” is referring to the royalties that Spotify must pay music rights owners in exchange for using their work.
Factor in product development, sales, marketing and general administrative costs, however, and you end up with an operating loss of $389 million.
On a brighter note, the streaming music giant said its advertising sales revenues increased 50.3 percent year-over-year from 2015 to 2016.
Spotify in April signed deals with Universal Music Group and indie label Merlin that allow artists to keep their new albums off the free streaming tier for a period of up to two weeks after launch. This clause, along with other aspects of the deals, should help Spotify generate a bit more revenue moving forward. Similar deals with Sony and Warner (which haven't yet been signed) should only help the cause although it could still be a while before the company turns a profit.