Spotify sued!

Each one of us at least heard once about Spotify. The Swedish giant music streaming company has just been sued for copyright infringement by by Wixen Music Publishing, reports DJ Mag.

Giant lawsuit

Wixen Music Publishing is the copyright owner of such artist music as Tom Petty, Neil Young, Weezer, the Black Keys, Sonic Youth’s Kim Gordon, and many more. The amount of lawsuit is astonishing $1.6 billion.

According to Reuters Agency, Spotify was valued $16 billion in September. This means that Wixen claims the right to 10% of the company value. What’s more interesting Spotify is right about to enter the New York Stock Exchange (NYSE) in terms of so-called direct listing. That means this will be different way than other tech startup companies and is way more risky not only for the company but also for the potential investors as there is no guarantee that Spotify’s shares will grow in worth.

A giant on clay legs?

Spotify’s business model is also its weakness. The more company grows the more money it loses as it needs to pay more to copyright holders. Right now each month Spotify earns about €3 billion and loses almost €600 million.

2010: income 98 M $, loss 38 M $
2011: income 243 M $, loss 59 M $
2012: income 575 M $, loss 78 M $
2013: income 746,9 M €, loss 93,1 M €
2014: income 1,08 B €, loss 162 M €
2015: income 1,95 B €, loss 234 M €
2016: income 2,93 B €, loss 539 M €

As it can be clearly seen, the more users, traffic and income, the bigger is the loss. It is possible that the latter will overcome the first. Spotify is well known for paying giant salaries to their executives and for hiring extremely expensive offices all over the world. Are these signs of a near end? Time will tell.

Post Author: Steve