Spotify grows, but is still not profitable

There is something that I will never finish understanding, no matter how much they explain it to me, about the new economy that has arisen from online services like Spotify, is that they can stay in business for years even though their accounts never turn a profit. Yes, I know that they depend on investors who trust that at some point the long-awaited profitability will arrive and, with it, the distribution of profits among those who, for more or less time, have paid for the maintenance of the activity.

What surprises me, what I don’t fully understand, is how long this model can be sustained, even more so when we talk about products and services that do have one or more clear avenues of income, that enjoy a more than relevant position on the market and that, therefore, sSeen by most of the world as successful companies. This is the case of Spotify, of course, but we could also cite many others, such as Twitter.

I say this because Spotify has just presented its latest economic results, those for the fourth quarter of 2022, which have a positive and a negative part. And the most striking thing is that, if we only knew one of the two parts, we would think that the other is not possible, but, as we can see in said document, it is.

Spotify grows, but is still not profitable

The positive part is that Spotify has reached a milestone by reaching 205 million paid subscriptions. Surpassing the psychological barrier of 200 million is already a great success for the company to celebrate, but doing so with no less than five million more is a clear sign both of the proper functioning of the service and that it is managing to grow its customer base. paying customers, something that will undoubtedly be most comforting for all investors, who see that the path to profitability is still open.

However, and as a counterpoint, not even after having reached such a remarkable figure, to which we must add their mmore than 489 million active usersand after the dismissal of more than 600 workers that took place last week, SPotify recorded an operating loss of 231 million euros in its last fiscal quarter of 2022. According to the company, this responds to its preference to continue growing its user base, over making a profit. Which, of course, makes us wonder, what is the magic number? Or, what plans does Spotify have to improve its numbers and become profitable once it has reached them? We have already gotten used to price hikes in video streaming services, maybe we should expect something similar for music services in the future?

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