The Catch-22 in Spotify's business model

The streaming service just can't seem to scale profitably

Spotify continues to lose money.
(Image credit: Illustrated | Images courtesy of Spotify, sleepyfellow / Alamy Stock Photo)

Spotify published some eye-popping financials on Monday. It managed to pull in $2.18 billion in revenue in 2015, up 45 percent from 2014. And it's still losing money.

This gets at one of the difficulties intrinsic to the business of streaming music. Offering free music along with ads to generate revenue has allowed Spotify in particular to expand massively: It now boasts 75 million users worldwide. Yet the vast majority of its revenue — $1.95 billion — comes from its 30 million paid subscribers. Revenue from ads was just $219 million.

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Jeff Spross

Jeff Spross was the economics and business correspondent at TheWeek.com. He was previously a reporter at ThinkProgress.