Why Spotify Keeps Losing Money

Analysis of Spotify’s profitability problem and the company’s recent efforts in turning the situation around.

Despite being the world’s largest music streaming platform, Spotify has never made a single dime in profits so far. The company has never had a profitable year in its history, and over the years its losses has added up to over 4 billion euros. For a company that has not only disrupted the entire music industry but also completely revolutionised the way we consume music, one would reasonably expect Spotify to be drowning in profits. However, the reality is that Spotify has never been able to turn a profit, making it the only software company that generates over 10 billion euros in revenue each year to consistently lose money.

Sources & footnotes:

00:00 Intro
00:43 Why Spotify Loses Money
02:45 Spotify vs Other Streaming Platforms
06:14 Spotify Is Not The Netflix of Music
10:06 Spotify’s Expansion into Podcasts
13:02 The Clock Is Ticking
14:44 Conclusion

[ArturdeSousaRocha]

Now I understand why Spotify was so hell bent on pushing podcasts even when many users hated that.

[joselara]

Spotify should establish a concert ticketing company to compete with ticket master and end their disgusting monopoly.

[FunkmasterRick]

The worst part is that nearly any innovation Spotify manages will immediately be adopted by their competitors, making Spotify little more than a free research and development department for their competitors.

[brockobama]

After watching the spotify documentary on netflix, i still despise the labels. Everyone in the course of spotify's uprising gave spotify shit for not paying the artists enough, but just prior to that the blame was placed on the labels! why is it still not on the labels? they take everything from the artist and the streaming platforms, and there is nothing anyone can do about it because
1. that's just the way it is
2. they have a lot of money to defend themselves

[UrbanstepOfficial]

Spotify supporting independent artists might solve lots of issues they are facing with major record labels. Yet editorial playlists are filled with the same labels/artists.

[bluestar]

The more we see that the content streaming model isn't the cash cow most companies expected to be. We see this not only with Spotfy, but also video and movie streaming services. Xbox's GamePass might as well not be profitable.

[Thejoyceeful]

What a detailed analysis on Spotify’s unique situation! I like how you’ve kept it very concise and easy to understand even for people like me who isn’t usually interested in lengthy “business” videos. This is a GEM 💎

[Psycandy]

the industry has consolidated into bodies which will resist competition, only because they've been aggressively purchasing labels. what this means is that indie labels gain traction, so all spotify needs to do is bias the algorithm toward the more favorable licenses. spotify could equally consolidate indie (and soundcloud, beatport, bandcamp) and self-published music to form a publishing platform with benefits exceeding those offered by large labels. the algo can, over time, create these leverages.

[EthanReilly]

You forgot to mention that Spotify now offers audiobooks and probably gets a significant amount of money by doing that.

[Chario_]

Genuinely shocked that this channel only has 900 subscribers - this is genuinely some top-notch content. Keep up the great work!

[mistymu]

In an ideal world, we would break up the power of the major labels. In a world with platforms like YouTube, where anyone is able to record a song at home and potentially push it to millions of people globally. Labels in the past provided the cash to record an album, distribute it globally and push it to radio. Not only that, but the deals that labels give artists are terrible. I can imagine a system like the App Store, where the artist uploads their music, Spotify takes a 15-30% cut and the artist takes the remaining 70-85%, which is significantly more than the maybe 10% they get from a label, then they have to pay their advance back to the label before the artist sees any kind of profit.

But in the real world, a lot of very valuable catalogs are owned by the labels (legacy and current major artists), without which, no one would bother subscribing to Spotify.

[garrettrinquest]

One thing Spotify could do is partner with smaller labels and groups to give more promotion to music that doesn't charge them as high of licensing fees. If it works correctly, it would cause way more competition in the music space. Smaller music labels, that take smaller cuts, would grow to compete with the big three or the big three would need to lower prices. Either way, it's a win-win for Spotify and the health of the industry as a whole

[ehmzed]

I see that in their app they also let you buy artists' merch and concert tickets through other websites. They might wanna sell those themselves eventually.

[pokepress]

There’s another implicit ceiling on streaming plan pricing-most folks won’t pay more for an audio streaming service than a video one.

[kangamooo]

Only 2 videos and somehow one of the best channels on youtube. Actually mental.

Keep up the vids, but please don’t sacrifice this level of in-depth research and engaging writing for faster uploads, as it will be the reason me and many others keep coming back.

growth is gonna be exponential i can feel it ❤

[ezraodole]

Spotify should become a record label and scoop up young talent on rewarding contracts. Basically doing Netflix’s approach of building an in-house arsenal. But, they probably can’t since the old labels have so much power over them and may pull their artists if Spotify oversteps.

[dbonechis]

Dear God, if Spotify goes down, I'm going to cry.

[leogougeon]

What an excellent, concise and well produced video detailing Spotify’s unique financial situation. The comparison between Netflix was also very well done. Bravo.

[chocolateearrings]

A lot of the streaming or internet services we all know and love are hemorrhaging money at the cost of user gain.

[apegraham]

Please continue to make the presentations simple as you get bigger. It's fun and easy to follow.