Spotify, a music streaming startup that competes with Pandora and iTunes, is on track to more than double its 2011 revenue, TechCrunch’s Eric Eldon reports.
In 2011, it raked in $244 million but reported a loss of $60 million. That’s because the record labels it works with are sticklers; they require either $200 million in annual payments or 75% of Spotify’s total revenue, whichever amount is higher.
2012 will be the first time Spotify gives up 75%. Eldon says Spotify is on track to pull in annual revenues of $500 million; it generated $200 million in the first half of 2012.
But while its user numbers are steadily growing (AppData shows at least 23 million people use Spotify every month, up from the 15 million total users Spotify reported in July), Spotify is still in the red.
“The company is projecting profit after cost-of-sales to be around $60 million,” Eldon writes. “It still has another $100 million in engineering, marketing, sales and other operating costs, on top of the licensing burden, so it’ll likely post an annual loss of roughly $40 million.”
Spotify is reportedly seeking a new $100 million round of financing to help overcome its high operating costs. The round would value it at $3.25 billion. But that figure is lower than an earlier, $4 billion valuation that floated around.
Eldon points out that, while Spotify is bleeding money, things aren’t as bad as they seem. A high percentage of active users actually pay for the service (4 million people on the 15 million July number), and record companies are happy to have Spotify as a partner. It isn’t eating away at other revenue streams, it’s just putting more money in their pockets.
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