Spotify saw its revenue climb to €746.9 million in 2013, which equals about $931 million under today’s exchange rate, according to a new financial filing the company released this week which was first reported by the Guardian. Revenue was up from €430.3 million ($536.8 million) in 2012, but losses also rose: Spotify was €93.1 million ($116.2 million) in the red in 2013, compared to €80 million ($99.8 million) in 2012.
The good news for [company]Spotify[/company] is that its revenue grows much faster than its losses. The company’s cost of revenue, which largely consists of the royalties the service has to pay to labels and other rights holders, decreased from 90.5 percent in 2012 to 82.5 percent in 2013. That’s why in its letter to investors, Spotify noted:
“We believe that we will generate substantial revenues as our reach expands, and that, at scale, our margins will improve.”
However, scale comes at a cost as well: Spotify doubled its marketing expenses in 2013, and also significantly increased spending on R&D.
So where is the company’s money coming from? The big money maker for Spotify are subscriptions, which brought in €678.7 million (about $846.6 million) in revenue in 2013, whereas the company’s ad-supported tier only generated €68.2 million (about $85 million). At the end of 2013, Spotify had 8 million paying subscribers and 36 million active users. Recently, the company revealed that it has surpassed 12.5 million paying subscribers and 50 million active users.