Business Matters: A $3 Billion Valuation Brings Spotify Expectations Back to Earth
Business Matters: A $3 Billion Valuation Brings Spotify Expectations Back to Earth

Strong growth in subscriptions helped Spotify's U.K. operation generate £95.5 million ($154.9 million) in total revenue in 2011, up from £63.2 million ($102.5 million) the previous year, according to its latest financial statement, as reported in the Financial Times.

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Total revenues from subscriptions climbed from £45.1 million ($73.2 million) to £72.5 million ($117.6 million) for the 12-month period ending 31 December 2011. It should, however, be noted that these figures do not exclusively represent the U.K. business and include additional income from Spotify's European subsidiaries until the end of May 2011, after which the U.K. and European subscription revenues were separated, according to reports.

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Meanwhile, advertising revenue for Spotify's U.K. operation rose 24% to £22.4 million ($36.3 million) in 2011.

The company's operating losses consequently fell to £2.1 million ($3.4 million) from £26.5 million ($43 million) the previous year. Ad revenue accounted for 23.5% of all revenue in 2011, down from 2010 when it comprised 28.6% of overall revenue, according to Media Week.

Spotify's U.K. operation first launched in 2008 and offers two subscription price points to users - £4.99 ($8.10) for unlimited streaming and £9.99 ($16.22) for the premium mobile service. In line with other markets, it also runs a free ad-funded service, which accounts for the majority of its user base.

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Earlier this month, Spotify U.K. managing director Chris Maples was promoted to the role of vice president of Europe. Spotify currently operates in 15 markets, including its native Sweden, Germany, Spain, Australia and the U.S., where it launched last summer following lengthy negotiations with labels and rights holders. According to an interview that founder and CEO Daniel EK gave to Swedish financial newspaper Dagens Industri in April this year, Spotify generated $250 million in total global revenue in 2011. The Stockholm-based company claims to have over 15 million active users worldwide and more than 4 million paying subscribers.

According to a recent report from Strategy Analytics, revenues generated by streaming services is predicted to grow by 40% globally in 2012.

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