Spotify has been in the limelight for quite some time as investors and analysts have been talking about how the technology company has the potential to change the music industry. However, the music sector itself is not ready to accept Spotify especially after previous technology enterprises like Napster have made the music industry worries. Spotify has tried to be a legitimate company by licensing music but executives and artists do not think that the payments from the company are up to par.
Spotify needs to prove to record labels that it is worth licensing music to the internet music firm. One way to do this might be to increase annual revenue. Eliot Van Buskirk of Evolver.fm believes that the magic number might be $1 billion which Spotify can reach next year.
Van Buskirk used the data that Spotify has released publicly to get to the answer. The 20 million users along with 5 million paying subscribers means that Spotify will get $621 million of revenue for 2013. This is assuming the startup completely stops adding users. However, with the knowledge that Spotify has doubled its users in the past year he goes on to conclude that the company will hit the $1 Billion mark.
Others also agree with the conclusion and Paul Resnikoff, editor of Digital Music News, says that. “It seems very likely. Subscriber numbers are ramping up pretty rapidly. They definitely have some very aggressive numbers.”
Still others disagree and PrivCo, a company that looks at financial data for private firms, says that Spotify’s business model is “broken” and needs “drastic changes.” PrivCo CEO Sam Hamade says that, “No matter how we slice the math, it is patently clear that something’s gotta change soon on Spotify’s business model if the company is to survive.”
The real question in the end may not be if Spotify can reach the billion dollar mark. The internet music company needs to develop a business model that is sustainable for the long run. The startup needs to add more artists to its catalogue sin order to do this. If it can add more songs than it may have a chance to become profitable and a true force in the industry.
Source: PandoDaily
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