Perhaps it shouldn’t be a surprise since they’re working in the music industry, but Spotify is having a tougher time than expected monetizing its users. The number of paid users has been smaller than predicted, but currently Spotify is focused on growth and on making their program indispensable in users’ lives. Spotify claims they are making money on each new user they get, whether they’re free or paying, making all growth positive for them. In total, the company is shooting for around €690 million in turnover this year.
Still, country by country growth is expensive for them due to the licensing fees individual to each country. The Wall Street Journal reports that the company has paid around €200 million to labels and publishers since the service was launched in 2008.
Last Friday CEO Daniel Ek of Spotify gave an interview to Dagens Industri. There he somewhat confirmed DI’s sourced numbers that Spotify’s 2011 revenue grew 160% to SEK 1.69 billion (€190 million), but at the same time losses grew from SEK 253 million to SEK 402 million (€28 to €45 million). Spotify has around 3 million paid users across 13 countries, but it also has around 7 million more free users that listen to music with advertising.
PaidContent quotes Ek in the Dagens Indstri article as saying “The question of when we’ll show a profit actually feels irrelevant. Our focus is entirely on growth. It is priority one, two, three, four, and five.”
Ek also said that Spotify has no need for more capital to follow their business plan, but he’s learned it’s good to raise money when you don’t need it — if you can get a good valuation. Spotify is reportedly looking for funding at a $3.5 billion valuation.
As another channel to bring in some revenue, the company is also releasing branded apps for AT&T, Intel, McDonald’s, Reebok, and others. These brands will be able to curate music, maybe increasing the hipness of companies like Intel and AT&T.
Update: The Verge has an Instagram photo by Swedish technology consultant Magnus Johansson of what he claims is a beta of Spotiy’s official iPad app.