why is Spotify a loss making enterprise? Where did they mess up?
In: Economics
They haven’t messed up. They’re building a consumer base. They have 600 million users, currently. About 40% of those users subscribe to their premium, paid monthly service. Those 40% of paid users generate something like 90% of their income. The 60% of free users generate very little income for them. Spotify’s goal is to convert more users to premium, or gradually raise the cost of premium, or some combination of both, until the company becomes profitable. But, the company running at a loss does not mean it’s “messed up.” This is common for companies, as a way to build a customer base. Amazon ran at a loss for years, Uber did, Netflix did (might still, I’m not sure), etc. You subsidize your company with venture capital until it’s big enough to support itself.
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