Enders Analysis believes that the subscription model will make Spotify profitable this year, predicting it to reach 2.5m subscribers by the start of 2012.
Enders Analysis has released a report that predicts Spotify will sail past its current 2m subscriber mark to 2.5m by the end of the year, with growth in Europe stemming from partnerships with mobile network operators and internet service providers.
The report predicts that Spotify’s £25m losses in 2010 were predominantly from the advertising side of the business, offset by a predicted £18m profit from the subscription side.
Enders believes some of the losses from the freemium model will be offset in 2011 by Spotify’s decision to set a lower usage cap for free users earlier this year.
Enders predicts that this, combined with the growth in paid subscribers globally, which Enders believes will bring in £130m in revenues in 2011 and a predicted £50m gross profit, will see the company profitable overall in 2011.
Alice Enders, author of the report, said, “In Europe, Spotify’s halving of regular usage caps in May and declining user levels should greatly reduce the gross loss on the ad-supported side of the business. In the US, it’s the opposite: ComScore reported 3.7m monthly uniques in October 2011, most enjoying free uncapped on-demand streaming. On balance, the improved European performance could net out losses in the US market. Overall, we expect Spotify to report a gross profit in 2011.”
In September, Spotify announced a major partnership with Facebook, forming a deep integration with the site that allows users to see what their friends are listening to on Spotify without leaving the social network. According to Facebook, the tie up has led to 4m new members for the music streaming service (nma.co.uk 9 November 2011).