Spotify’s revenue soars, but growth comes at a cost, report says

Music-streaming service Spotify reportedly saw revenue soar in 2014, but the cost of new products and expansion also resulted in a bigger operating loss.

Spotify generated revenue of 1 billion euros (about $1.1 billion) in 2014, jumping 45 percent compared with the same period in 2013, according to Reuters, which obtained the company’s financials Friday. Spotify suffered an operating loss of 165 million euros, nearly doubling the 91 million euros the company lost in 2013, according to Reuters.

The report on Spotify’s financials comes at a challenging time for the Stockholm-based company. The service, which counts more than 60 million active users worldwide — including 15 million paid subscribers — has a new competitor in Jay Z’s Tidal service. Tidal is designed to offer an alternative streaming service to users while providing artists more royalties. If successful, Tidal could place significant pressure on Spotify, Pandora, and other services that have historically delivered lower royalties to artists.

Tidal’s launch came on the heels of Taylor Swift announcing last year that she had removed her tracks from Spotify. The move was part of Swift’s desire to take more control over her music and how it’s peddled online. Swift, meanwhile, is a backer in Tidal, joining Madonna, Coldplay, Rihanna, Kanye West, and Beyonce.

As Tidal continues to press on, Spotify has run into another significant issue: Apple’s overtures in the streaming space. Reports surfaced earlier this month that Apple has been pushing record labels to stop supporting Spotify’s service and work with its own. Investigators at the Department of Justice are now looking into the claim and so far, Apple has not confirmed that it did in fact hold those conversations.

Still, the move would seem to support earlier news that Apple is planning to launch a new streaming-music service sometime soon. Digital downloads of music are on the decline, due in large part to streaming popularity and Apple is looking for opportunities to compensate for such losses in its iTunesstore. Offering a streaming service that would compete with Spotify could be one of the ways Apple achieves that goal.

Still, Spotify presses on. According to Reuters, Spotify’s losses last year were due to its desire to invest heavily in global expansion and improving its product. That effort seems to be paying off: a report last month suggested Spotify is closing in on a new investment round that would push its valuation to more than $8 billion.

To put that into perspective, one of Spotify’s top competitors, Pandora, is valued at $3.9 billion. Last year, Pandora generated $920.8 million in revenue and lost $30 million.

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