Spotify’s growth dogged by losses; new investor brings hope

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Spotify’s growth dogged by losses; new investor brings hope

In the second half of the 1990s, the Swedish Government began to create a nation of digital experts – pushing legislation to treat broadband as a vital public utility and creating schemes which allowed all citizens to purchase computers.

Unfortunately, this societal development coincided with the launch of Napster – an American file sharing site.

These two events gave a nation of technically-savvy Swedish teens the ability to access music for free at a faster rate than anyone else; something they did with gusto.

Piracy soon became endemic, and across the world the music industry contracted. In 1999 the industry’s worldwide revenue had reached a peak of USD 27 billion; but by 2008 it had almost halved.

In amongst this, Sweden was known to have the worst piracy issues in the West: Enter Swedish entrepreneur and technologist Daniel Ek.

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The launch of Spotify

After creating a demo of music streaming service, Ek approached Per Sundin, Chairman and CEO of Universal Music Sweden. Sundin was both impressed by the demo version, and in desperate need of a solution for the industry’s current piracy problem, and he convinced his bosses to back it.

Spotify went live in Scandinavia, France, Spain and the UK in October 2008. A few months later, the Swedish Government announced EU anti-piracy measures.

“People were listening to more music than ever in history” Ek once noted, “yet the music industry was doing worse and worse. So the demand for content was there, but it was a different business model.”

The next stage

As of last March, Spotify released figures stating it had 24 million active users, and of those, approximately six million were paying customers.

It’s most recent initiative is an artist marketing program called Spotlight, which functions as both a discovery and promotion tool.

In September, Spotify expanded to Argentina, Greece, Taiwan and Turkey, bringing its total number of supplied territories to 32.

Yet in spite of the figures and developments, the company continues to make losses, and has recently been searching for a more vigorous, commercial model to move it into stable profitability.

This search recently culminated in news that Spotify and Technology Crossover Ventures (TCV) are close to announcing a USD 200 million funding deal, according to Sky News.

TVC has a USD 7.7 billion technology fund, and also invests in Facebook, Groupon and Netflix.

It remains to be seen what the new investment – if it happens – will mean for Spotify, but no doubt other future investors will be keeping a close eye on all developments.

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