During this seemingly endless profit ‘freefall’, many theorists, broadsheet journalists and even iconic frontmen pejoratively declared the music business ‘crashed’ (Knopper, 2009) ‘dead’ (Luerssen, 2008) and ‘broken’ (Lindvall, 2008).  Although last year's increase does not undo more than a decade of declining profits, new research suggests commercial streaming services like Spotify helped engender this turnaround (2013b). However Spotify founder and CEO Daniel Ek insists he’s  not the saviour of the recording industry (Busari, 2011), despite findings from a recent study by international research group NPD indicating a correlation between the rise of streaming services and the decline in music piracy (NPD GROUP, 2013). According to this study the number of consumers using P2P file sharing services declined by 17 percent in 2012, with the worldwide volume of illegally downloaded music files declining by 26 percent. More tellingly, the study also found nearly half of P2P file sharing consumers cited their use of legal music streaming services as the primary reason for stopping, or reducing their sharing activity. These statistics help validate claims streaming services are now an important fixture in music consumption habits.

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Since its inception in Sweden 2006 Spotify has launched in more than 28 countries. The world’s leading music streaming service, it has over 24 million active users, more than six million of whom pay monthly subscriptions (2013c). In their in-depth marketing and management study David A. Aaker and Damien McLoughlin state it was Spotify’s ability to anticipate and address the “nebulous pattern of change” (Aaker and Mcloughlin, 2010) in the music industry which prevented the company from liquidation. While early market competitors Ruckus and SpiralFrog were forced to shut down operations during the global economic downturn of 2008, Spotify grew and ‘changed rapidly’ (Aaker and Mcloughlin, 2010) in an ‘unforgiving’ climate (Aaker and Mcloughlin, 2010). If recent speculation can be believed, the company has no plans to rest on its laurels.  According to its ‘sources’ Business Insider claims the streaming giant plans to directly challenge Netflix by also adding a video streaming service, which will reportedly include its own original content (CARLSON, 2013).

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While the history of Spotify in many ways reads like a dot com success story, the company’s financial situation is far from perfect. The costs of acquiring the rights to stream the music in its library are extraordinary. Its current licensing agreement requires Spotify pay either $200M, or around 75 per cent of total revenue (whichever is higher) annually to record labels (SISARIO, 2012). This agreement explains why, in its five year history, the company is yet to post profits. Digital music entrepreneur Michael Robertson argues such monopolistic licensing agreements mean Spotify and other music on-demand services in their current form can never be profitable (ROBERTSON, 2011). Despite this Spotify’s aggressive international expansion in recent years has also rapidly increased the company’s revenue. According to TechCrunch, the company made as much as $500M in 2012 up from $248M the previous year (ELDON, 2012). However, it must be noted this figure has not been confirmed by Spotify, and does not include the cost of the company’s aforementioned international expansion.