Spotify just hit a milestone 10 million paid subscribers. Another approximately 30 million people use the free version of the streaming music app. Despite this impressive milestone, the company has yet to make a profit.
Despite its popularly, streaming music is not generally profitable. Even Pandora, a well-established Internet radio service and a top-grossing streaming app has yet to turn a profit. Neither has iTunes Radio, although as a part of iTunes that loss is absorbed by Apple (NASDAQ:AAPL). For Spotify profit is just out of reach at the moment, although it may reach the break-even point soon.
The company earns money from subscriptions and advertising on the service’s free version. About 70 percent of Spotify’s costs are music royalties (although most artists are not making much from streaming music). The remaining 30 percent is used to cover overhead at the company, reported Bloomberg Businessweek. That piece speculated that Spotify is the closest to profit. “Roger Entner of Recon Analytics says streaming music services should be sustainable when they reach 10 million paying users,” wrote Joshua Brustein, who authored the piece.