Spotify’s Q3 2017 financials show the grim financial reality streaming music platforms.
With Spotify gearing up for its highly-anticipated direct listing on Wall Street this year, how has the company fared?
Not so well.
According to digital media company The Information, the company’s latest Q3 financials suggest that full 2017 operating losses will top $369 million. On revenues $3 billion, Spotify’s losses rose to $581 million in 2016. A year prior, the streaming music platform reported losses $205 million. In just three years, the company has lost $1.16 billion.
How will Spotify ever turn a prit?
The news may unnerve already-anxious investors who worry about the company’s lavish spending. A report published last December showed that top Spotify executives earned 7-figure salaries in 2017. For a new fice in Manhattan, the company will reportedly spend over $566 million on a 17-year lease. Per year, the contract works out to $33.29 million on base rent. Spotify executives had to pay $31 million in upfront payments alone. In addition, with over four major acquisitions last year, the company’s path to pritability remains murky at best.
The Information added that Spotify must work quickly to convince investors that it will grow quickly. Private trading in the company placed its valuation at over $19 billion. GP Bullhound, a major investment bank, states that Spotify may reach $20 billion once Spotify goes public. Halfway through 2018, the investment bank expects the platform’s subscription numbers to reach 100 million. By the end 2020, its user base may rise to 500 million, with 200 million global paid subscribers. GP Bullhound’s analysis may not matter to investors, though. In another major setback for the company, two days ago, the Wall Street Journal found that Apple Music will surpass Spotify’s US subscriber tally this summer.
The company’s recent financials contain a silver lining, however. In the third quarter 2017, two investors confirmed that Spotify generated $1.2 billion in revenue. Full-year revenue will reach close to $5 billion, up 40% over 2016.
Yet, ahead its direct listing, Spotify will have to convince investors that it can justify its valuation. It will also have to find a way to finally post a prit.
Featured image by Paul Hohmann (CC by 2.0)