Gross Margin Blues

There has been a lot of excitement around streaming lately. At the end of last year, Apple launched their own service that amassed over ten million users in just three months.

Despite the competition, Spotify was able to grow its user base at an even faster pace than usual and now boasts over thirty million users. Streaming now generates nearly $3 billion in revenue, which allowed for the first growth in recorded music sales in many years.

At the end of March, Spotify raised over $ 1 billion in convertible bonds that hold- ers can convert into a specified number of shares. The issue proves that the markets still consider Spotify a good investment, though the involvement of the equity firm TPG and hedge fund Dragoneer suggests that mostly high-risk takers are taking the bite.

Spotify, like other streaming services, has yet to post a profit. In France, Deezer cancelled their plans to launch an initial public offering in the fall of last year at about the same time that talk about Spotify’s own IPO, for likely over $8 billion, was quelled.

Source: Berklee College of Music

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