Back in Black: Spotify UK Revenues Climb on Subscription Growth

Daniel Ek, Founder and CEO of Spotify
Michael Loccisano/Getty Images for Spotify

Daniel Ek, Founder and CEO of Spotify speaks onstage at Spotify Press Announcement on May 20, 2015 in New York City.

The U.K. arm of Spotify bounced back into profitability last year, fueled by strong growth in subscription sales.

According to the company's latest set of financial results, which cover the year 2015, total revenues climbed to £187 million ($228 million), up from £159 million ($194 million) the previous year. Subscription sales accounted for the bulk of revenues, totaling £172 million ($210 million), up from £119 million ($146 million) in 2014. 

They were offset in a slight fall in advertising sales, which dropped from £11.1 million to £10.8 million, and a rather more substantial decrease in "intercompany services" within the Spotify group, which tumbled from £28 million ($34 million) to £4 million ($4.9 million).

In line with the growth in subscription revenues, payments to rights holders and record labels climbed to £149 million ($182 million) from £124 million ($151 million) in 2014. Distribution costs fell from £8.5 million ($10 million) to £3.2 million ($3.9 million).

Total year-end profit after taxation stood at £1.2 million ($1.5 million), compared to the same sized loss that was posted the previous year. A spokesperson for the company declined to comment.

"2015 was a big year for Spotify and we had some very significant successes," said Spotify U.K. co-director Barry McCarthy in a statement included in the Companies House filing.

"The company's primary focus is to continue its rapid growth and increase the number of users and subscribers in the U.K. 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 service of its kind worldwide," continued McCarthy, who was appointed director of Spotify U.K. on January 1 this year, replacing the previous incumbent and company founder Daniel Ek. Spotify U.K.'s other director is listed as Angela Claire Mary Watts.

The market leading company -- which announced in September that it had 40 million paid subscribers worldwide, up from 30 million just six months previously -- is currently preparing for its IPO, which sources peg for late 2017.

The strong financial results for the London-registered British arm of Spotify come 24 hours after it was announced that Martin Lorentzon, one of Spotify's co-founders was stepping down as the company's chairman. Going forward, Daniel Ek, the public face and CEO of the company, will be adding Lorentzon's title to his own, while Lorentzon will remain on the board of directors.

The results also arrive as rival Pandora prepares to launch its own all-you-can-eat streaming service, and two day after online retailer Amazon unveiled a three-tiered service aimed at its massive -- and possibly streaming-shy -- customer base.