$698.1 Million Reasons Why Spotify Isn’t Sustainable…

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The plunging losses explain a recent, $1 billion tranche in loans, which brings cumulative loans and debt to roughly$1.56 billion.

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The next step is a massive Wall Street IPO, one that could generate billions in fresh capital. But here’s another problem: analysts don’t think Spotify will ever reach profitability ...

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+ The 2 Spotify Charts You Need To See

Rights costs are Spotify’s Achilles Heel. Rights and associated costs accounted for 83% of Spotify’s 2015 revenue, up from 81% in 2014 and this resulted in a dramatic fall in Spotify’s gross margin per user: down from $4.20 in 2013 to $3.45 in 2015. This is particularly challenging for a model with already wafer thin margins. A number of factors underpin this decline:

• Discounted promotions: ...

• Advanced label payments: ...

• Publisher rates: ...

Maybe if/when Spotify gets to 50 million subscribers it will feel it has enough clout to compel rights holders to rethink licensing economics. Perhaps it will take Spotify getting to a 100 million to make that happen. Perhaps it will never happen. But if it doesn’t, the economics of streaming will remain so broken that only companies with ulterior business objectives will remain viable players, enter stage left streaming’s Triple A: Apple, Amazon and Alphabet (Google). The labels need to ask themselves whether that is the streaming future they want…

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+ No, seriously: Spotify is the best streaming service at losing money

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