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November 12, 2012

Spotify Receives $3 Billion Valuation, Still Losing Money

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Spotify 3 billion companySpotify will likely pass the $500 million revenue mark for 2012 and with losses still on the books the company is expected to seek a new round of funding, money that will valuate the company at more than $3 billion.

Revenues at Spotify are expected to more than double from last years $244 million thanks to a growing user base with a larger number of paying customers.

Spotify currently allows for two profit models. The first option is an ad supported system that generates revenues through ads. The second system includes $5 per month for ad-free computer support or $10 for ad-free mobile support.

While the company will take in $500 million this year Spotify currently must pay the major labels $200 million or 75% of total revenue, whichever number is higher. On $500 million that total payout would equal $375 million. Spotify will likely earn $60 million off that$500 million but the company is also reportinganother $100 million in engineering, marketing, sales and other operating costs. Based on it’s own estimates Spotify will likely lose around $40 million in 2012. read more

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