Digital music service Spotify saw revenue 2011 grow 151 percent year-on-year to USD 244 million, according to analyst bureau PrivCo, citing the company's confidential earnings report. The company paid USD 238 million in royalties while personnel costs amounted to USD 32 million. The net loss therefore went to USD 60 million. PrivCo said the results were a clear indication that the company's online licensing fee/royalty model was increasingly restricting Spotify's ability to generate sustainable margins using its freemium model. During the year, Spotify's 311 employees recorded salary costs up 173 percent from the year before, outpacing revenue growth. "With 98 cents of every dollar of revenue going to pay music royalties, this leaves only 2 cents on the dollar to cover allL other operating costs, from all payroll, overhead, office rent, sales, marketing, data server costs, and so on, which is mathematically impossible," PrivCo said.
