Spotify triples its losses in 2020, to 581 million

The music production and distribution company and streaming podcasts Spotify recorded net attributable losses of 581 million euros in the whole of 2020, which is tripling the losses of 186 million that were recorded in 2019, according to the annual accounts published this Wednesday by the company.

Revenues between January and December were 7,880 million euros, which is equivalent to an increase of 16.5 percent compared to 2019. On the other hand, the costs associated with income, derived largely from copyright that Spotify has to pay artists and record companies, rose 16.3 percent, to 5,865 million euros. In this way, Spotify’s gross margin was 2,015 million euros in 2020, 17 percent more than the previous year.

Of the total revenue recorded, 7,135 million euros corresponded to the amounts paid by users with ‘premium’ subscriptions, 17.2 percent more, while the other 745 million euros came from advertising served to users who use the application for free, 9.9 percent more despite the impact of the pandemic on the global advertising market.

With regard to costs, sales and marketing grew by 24.6 percent, to 1,029 million euros, while general and administrative expenses were 442 million euros, 24.9 percent more. Research and development (R&D) increased by 36 percent to 837 million euros.

In this way, the firm saw its margins worsen during the past year. While the operating result was negative by 73 million in 2019, during 2020 it was negative by 293 million.

During the fourth quarter, the number of active monthly Spotify users grew 27 percent compared to a year earlier, to 345 million users. Of that number, 155 million were paid, while 199 million used the application for free.

The company has ensured that the growth in users has been complemented by an increase in subscriptions that has exceeded its estimates, a greater use of podcasts and a cash flow of 74 million euros.

Spotify’s average revenue per user (ARPU) in the fourth quarter of the year was 4.26 euros, 8 percent less than a year earlier. However, if the impact of the exchange rate is excluded, the decrease was 3 percent. To counteract this, Spotify has already raised the price of its family plans in seven markets in Europe and Latin America without registering loss of subscribers or new registrations. By 2021, the company plans to raise prices in another 25 markets.

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