Spotify 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 reporting another $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.
Should Spotify receive the $100 million funding round it is seeking the company will have a valuation of $3.25 billion.
While revenue still needs to crawl out of the red there is good news for the social music company, major record labels have been happy with Spotify’s progress, noting that unlike original beliefs the company may be helping record sales rather than cannibalizing them.
Do you currently use the free or paid versions of Spotify?