Spotify U.K. Subscription Revenues Climb as Overall Profits Fall

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Daniel Ek, CEO of Spotify, talks during a presentation at the 2012 Spotify press event on December 6, 2012 in New York City. 

The U.K. arm of Spotify experienced strong growth in its subscription and advertising revenues last year, but still posted a £1.2 million ($1.5 million) loss after taxation, according to the company’s latest set of financial results, which cover the year 2014.

For the year ending December 31 2014, Spotify U.K. grew total revenues from £131.4 million ($202 million) to £159 million ($245 million). The increase in sales was attributed to a year-on-year jump in advertising revenue from £10.2 million ($15.7 million) to £11.1 million ($17.1 million) alongside a significant spike in subscription revenues, which rose to £119.2 million ($183.3 million), up from £92 million ($141.5 million) in 2013.

"Individual company reports are not necessarily a reflection of the whole company, one way or the other," a Spotify spokesperson maintained in a statement provided to Billboard.

The rise in sales was not enough, however, to prevent the London-based company reporting an overall loss for the year after taxation of £1.2 million ($1.5 million) -- a significant slide when compared to the previous calendar year when Spotify recorded a profit of £2.6 million ($4 million).

The loss can be partially attributed to a sizeable rise in cost of sales -- a category that includes royalties paid to labels and publishers -- which jumped from £96.2 million ($148 million) in 2013 to £124.4 million ($191.7 million) last year.

2014 also saw wages and salaries rise from £6 million ($9.2 million) to £8.5 million ($13.1 million), while total employee costs (including pension plan and social security costs) increased to £12.3 million ($19 million), up from £8 million ($12.3 million) the previous year. Administrative expenses similarly climbed to £25.6 million ($39.4 million).

“2014 was a transformative year for Spotify Following the launch of a free Spotify tier on all platforms in December 2013, we successfully transition from desktop to mobile in the months that followed, ending with record growth in subscribers in the fourth quarter,” said Spotify U.K. co-director Angela Claire Mary Watts in a statement included in the financial results.  

“The company’s primary focus is to continue its rapid growth and increase the number of users and subscribers in the U.K.,” Watts went on to say, adding: “It is crucial that Spotify continues to build on the success which has seen the company emerge as the largest and fastest growing music subscription services of its kind worldwide.”