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Spotify lost more money than ever last year — which is great news for Spotify

The streaming music service's losses increased — but revenue grew much faster.

Spotify CEO Daniel Ek
Photo by Michael Loccisano/Getty Images for Spotify
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

Spotify lost more money in 2015.

And its managers and investors are probably very happy about that.

That's because the music streaming service's revenue increased much faster than its losses — something it hasn't always been able to say.

Given that Spotify has told its investors it is headed for an IPO in the next few years, it's the kind of performance it will need to be able to replicate with consistency.

Filings show that Spotify, based in Sweden and the U.K., generated revenue of $2.12 billion last year, up about 80 percent from the $1.18 billion it brought in the prior year (all prices in the story converted from euros to dollars at the exchange rate from December 31, 2015). Losses, meanwhile, hit $188.7 million — but that number was only up 6.7 percent from the previous year's total of $176.9 million.

That's a much, much better performance than 2014, when Spotify's losses ballooned by 289 percent, and its revenue was only up 45 percent.

As in the past, most of Spotify's revenue comes from its subscription service, which now boasts more than 25 million users worldwide. And most of that money goes right back out the door to music labels, artists and other music rights-holders.

If Spotify can keep it up, then it will have pulled off something special by showing it can run — and grow — a streaming music service at scale. Traditionally, streaming music services have struggled because their music expenses increased at the same pace as their growth — or even faster than their growth.

There are still lots of ways for Spotify's expenses to balloon, though. It is in the midst of negotiations with big music labels, who may want a big upfront check to continue using their music (though the labels themselves have equity stakes in Spotify). And Spotify is planning a push into video, which is a good way to burn though cash quickly.

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