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Spotify is one of the most popular streaming music services in the world. But Spotify loses $23.6 million in Q3 and missed its target for total monthly active users on a quarterly basis.
Despite strong paid subscription numbers, Spotify’s operating costs are outgrowing revenue-producing streams in some markets like China where it faces an uphill battle against local competitors with much lower rates. The company also faces increasing competition from tech giants like Apple and Amazon who are investing heavily into their own music services, including Apple Music and Prime Music respectively.
Spotify has long operated at a net loss with the hope of one day establishing enough paid subscribers and ad revenue to offset its increasing costs. The company sometimes posts a profit in a quarter, but these occurrences are rare. This is evidenced by their recent losses: In 2017, they lost $380 million on revenues of $975 million (the Wall Street Journal reports that this number was posted for 2018 as well).
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Spotify loses a huge market in China, but Why?
Spotify is a competitor to Apple Music for paid music streaming services. The Wall Street Journal reports that Spotify failed to reach its forecast of total monthly active users because it is losing ground as rival apple continues to gain traction among Chinese consumers through iPhones and other products. It seems like no one knows why they are still waiting on approval from Chinese authorities right now but this could also be another potential cause for lost revenue if they don’t get approved soon enough!
Despite a dramatic increase in both free and paid subscriptions, the increased costs of running an international company could not be matched by improved ad performance. Unlike prior quarters, Spotify failed to reach its forecast goal for monthly active user targets. Spotify has been continually losing money due to its lack of profits. The company has been involved in multiple lawsuits surrounding the distribution and payment of music, which is likely the cause of its losses. Spotify’s main competitor, Apple Music, often pays artists twice as much per stream as Spotify, while Apple does not offer a free version.
While Spotify is trying to bank on the Podcasting business and the new Greenroom a clubhouse competition, there is a lot of groundwork needed to be done. It’s not all bad news for Spotify. The company has been able to grow its paid subscriber base, and the majority of those users are paying at least $10 a month which means they’re less likely to cancel their subscription if there is an issue with the service in comparison to free trial members who may be more inclined to stop using it altogether after experiencing some sort of hiccup.
But as we mentioned earlier, competition from Apple and Amazon means that even though Spotify may have had a rough few quarters, things could turn around quickly as both companies seem determined to invest heavily into making their music services better than ever before which should only lead to good things for consumers like you! In case you’ve got money burning a hole in.