Spotify revenues rise to £1.95bn in 'best year ever' - but profit remains elusive

The music streaming service said that revenue growth of 80% was not enough offset losses

Subscription fees account for 78 per cent of Spotify’s revenue (Thomas Trutschel/Getty)

Spotify has heralded its “best year ever” after reporting revenue of almost €2 billion last year, even as losses widened.

The music streaming service said that revenue growth of 80 per cent was not enough offset losses, which hit €173 million in 2015, up from €162 million in 2014.

Spotify subscribers increased to more than 28 million in 2015, but the company has still never made a profit.

Spotify has been working hard to convert its free customers to paying premium members, who get ad-free streaming of the app’s 10 million songs for around £10 a month.

“We believe we will generate substantial revenues,” Spotify said in revenues filed in Luxembourg, “as our reach expands and that, at scale, our margins will improve. We will therefore continue to invest relentlessly in our product and marketing initiatives to accelerate reach.”

Subscription fees accounted for 78 per cent of Spotify’s revenue, or €1.74 billion, last year. Advertising revenue was also up 98 per cent at €196 million.

It also paid more back to the artists for the use of songs, with royalties and distribution fees rising 85 per cent to €1.63 billion in 2015.

Music consumption in the UK in 2015 increased 12.9 per cent including streaming of music videos, BPI numbers show, but income from sales and streaming fell 0.9 per cent to £688 million.

Ad-supported streaming platforms, of which YouTube is the main one, contributed only 4 per cent, or £24.4 million, of total UK record industry revenues even though they have grown 88 per cent year-on-year to make up a fifth of all streamed music.

Spotify and other audio streaming's share of total music consumption increased by 82 per cent in 2015, leading to a 69 per cent rise in revenues.

Meanwhile vinyl, once considered to be a dying format, earned the record industry £25.1 million - more than YouTube and all other ad-support video streaming services combined.