The co
ncerning thing here is the margins involved: sales and marketing costs alone sucked up more than three quarters of Spotify’s €321.7m gross profit. In a market where Spotify’s key rivals are now Apple, Google/YouTube and Amazon – tech giants with hefty cash reserves and built-in marketing platforms to take advantage of – Spotify’s marketing costs are only going to increase.
Bright spots? Spotify’s subscription income grew by 78% in 2015 to €1.74bn, as it ended the year with 28 million subscribers. Its advertising revenues grew faster though: up 98.2% to €195.8m, although ads remain just over 10% of Spotify’s overall turnover compared to nearly 90% for subscriptions. That 10-90 ratio of ads-to-subscriptions hasn’t changed since 2013.
Source: Spotify financials raise questions about streaming economics