Music streaming service Spotify loses as much money maintaining its free, ad-supported tier as it gains from subscriber revenues, according to a report from British research firm Enders Analysis. The report estimates that Spotify made a $76 million gross profit from subscriptions in its most recent financial year, but spent almost the same amount providing the free service that it uses to lure listeners in.
As The New York Times's Media Decoder blog points out, Spotify is in "growth mode," attempting to build up a dedicated, international user base at the expense of short term profits. But Enders Analysis warns that the company may be missing out on a legitimate opportunity to cut back losses or break even by limiting the amount of free music that it offers to users.
While Spotify places limits on free streaming in most markets, the service is still completely unrestricted in the US, with the company reportedly planning to keep it that way until July 2013. Its entry-level Unlimited subscription currently costs $4.99 per month, while Spotify Premium, which offers access to the mobile app and an offline mode, costs $9.99.