Spotify has been doing well on the revenue front, growing that aspect of its business by over 50 percent last year. The streaming music company reeled in $3.3 billion in revenue in total, as reported first by Recode, and spelled out in financial filings filed on Thursday. The company’s user base also grew to 140 million total people on the service, across both free and paid tiers, up from 126 million late last year.
The good news comes with some bad – or at least, some news that proves a good reminder what Spotify must do to continue its growth. The streamer will pay out at least $2 billion in minimum payments to record labels, to be spread out across the next couple of years. Its record label partners expect guarantee payments as a baseline for their continued allegiance to the service, on top of the per-stream rates that Spotify provides when users actually listen to music.
That’s the main reason that Spotify ends up making relatively little profit on its large revenue numbers; labels and other rights holders take the bulk of the pie in order to keep their content available. Josh pointed out that Spotify finally has some leverage with regards to rights-holders, however – though not all in ways that have immediate impact on the bottom line.
Spotify’s 50 million paying customers (the company didn’t update this number, which was current as of March) give it more options in terms of how it negotiates with labels, but don’t expect any dramatic reversals in the power relationship between Spotify and rights holders just yet.