Spotify returns to losses

Spotify, the market leader in streaming music, has again lost a considerable amount of millions of dollars, despite having increased its customer base, both free and paid.

Spotify has lost around $ 118 million in the third quarter of 2020, despite the fact that its monthly active users have grown 29% during that same period. In the third quarter of 2019, the company earned $ 282 million.

Spotify now has 320 million active users and 144 paying users. According to Spotify, its growth is due to the marketing it has carried out in India and which has launched the service in Russia and 12 other countries.

In the same quarter of last year, Spotify had 248 million active users per month, and 113 paying subscribers. Compared to last year, revenue per user has fallen by 10%, something that, among other things, Spotify is attracting new customers through discounts and offers on monthly plans.

On numerous occasions we have commented that Spotify is a business (like so many in the technology bubble) based on the idea of ​​permanent expansion, without paying attention to the profitability of the business. Spotify is the company that pays artists the least for reproduced content, and if the UK investigation bears fruit and forces payments to increase, Spotify’s business will be practically unviable: it would be forced to raise the price of the subscription, which would cause a cascade of cancellations, enlarging the black hole of losses.

In addition, in recent times Spotify has identified podcasts as a possible additional source of income, and has launched a strategy of exclusively hiring “stars” from the world of podcasting, so that their followers have to enter the platform if they want to continue enjoying the programs. All in all, according to Spotify’s own figures, the number of users who access podcasts within the platform has grown 1% compared to the previous quarter.

By cons, Apple Music, had 60 million subscribers last year. Apple Music does not have a free option and except for the free trial period, it does not usually have offers or discounts to retain users. In addition, in recent months it has launched new thematic radio stations, and tomorrow the Apple One subscription bundle will be available,

The slightest turbulence can send Spotify to the sky of the technologies that were pioneers but did not form a viable business plan.