Spotify’s UK subscription customer base grew by 42% in 2013, helping the company turn a profit in for the first time, suggesting its mixture of ad-funded streaming and monthly subscriptions are paying off at last.
The £2.6 million profit reported for last year is a dramatic turnaround from 2012, when the company suffered an £11 million loss.
A Spotify spokesman told The Guardian: “This growth can be attributed to a 42% year on year growth in UK subscriptions and also to an increase in advertising revenue.”
How much effect advertising growth alone would have had on its results is debatable, however, as it only grew by 12.9%.
The growth in subscriptions can be partly attributed to its partnership with Vodafone, which bundles subscriptions into its 4G contract deals, and a 50% discount for students, The Guardian suggested.
The company’s global financial results for 2013 are yet to be published, but in 2012, it suffered a 58.7 million euro loss – 10 million euros more than the previous year – despite growing revenues 128% in the same period.
In May this year, it announced it had hit 10 million subscribers worldwide. The effect on 2013’s results will depend on how many of the new subscribers signed up before the end of the year, but it still could indicate Spotify is on its way to turning a global profit.
While streaming may be popular among consumers, its effect on musicians themselves and the reward they receive for their work is more contentious.
Artists currently earn half-a-cent each time one of their tracks is streamed on Spotify, less than half what their record label receives (1.12 cents).
The company currently has more than 40m active users globally, with more than 10m of them paying for subscriptions at £9.99, the discounted £4.99 rate for students, or as part of a bundle in partnerships like that with Vodafone UK.
However, it has become a focal point for some musicians’ criticism of streaming music more generally: particularly the amount of money they earn from individual streams of their songs.
Spotify pays out 70% of its income in royalty payments to labels and publishers, who then pay musicians according to the terms of their contracts.
In 2013, Spotify said that the average amount it pays to rightsholders for a single stream of a track is between $0.006 and $0.0084.