Spotify is actually making money somewhere

Less money more problems.
Less money more problems.
Image: Reuters/Vincent Kessler
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Making money in the streaming music business is no cake walk.

The market is extremely crowded; users are split among myriad services, and licensing costs are high. That’s OK for tech giants like Apple, Google or Amazon, which see their streaming businesses as another way to push their core products. But it’s problematic for scrappier companies like Spotify and Pandora Media.

That is, unless you’re talking about the UK. The Guardian, citing regulatory filings, reports that Spotify, the Swedish-based streaming music company, actually eked out a £2.6 million ($4.2 million) profit in 2013 after losing £11 million ($17.7 million) in the country a year earlier. Revenue was up 42% to £131.4 million. A spokesperson told the Guardian the result was driven by rising subscriptions (up 42%) and advertising revenue.

Spotify hasn’t released its global results yet, but the company lost €58.7 million ($74 million) last year. The company has 10 million paying subscribers (and 40 million active users), but it’s not clear how many of those reside in the UK. The company declined to comment.

Pandora, the biggest streaming music company in the US, takes a different tack; its main service is free and advertising-based. The experience is more radio-like—you can’t play back individual songs, only generate playlists—which means it pays lower royalty rates. But it has still lost money for the past six fiscal years, according to FactSet.

Quartz reported earlier this year that the Spotify has been exploring a possible IPO, even hosting practice earnings calls. If the UK results can be extrapolated to other big markets (and that’s a very big ‘if’), turning a profit might be less far-fetched.