Rhapsody International, the company behind the subscription music service that predates Spotify by five years, posted about $202 million in revenue in 2015—a new record and 16 percent more than 2014 revenues. But Rhapsody also reported another record: a $35.5 million net loss.
Results for the privately held Seattle company were disclosed as part of a regulatory filing by RealNetworks, which owns 43 percent of Rhapsody after spinning the streaming service out in 2010. The record loss, which includes losses from both Rhapsody and Rhapsody International-owned Napster, may be due to the high cost of acquiring new users.
Despite subscriber growth soaring 45 percent in 2015, the streaming service wasn’t able to turn a profit on subscriptions, which cost between $4.99 and $9.99 per month. Rhapsody likely spent a big chunk of its revenue on marketing to new users and maintaining its existing user base.
But Rhapsody isn’t alone. Spotify, which is one of the largest names in streaming music, has about 10 times the subscriber base of Rhapsody, is also growing its losses. The $10 per month sweet spot for most streaming music services may get users in the door, but the cost of paying artists for streams and the entire streaming infrastructure can’t yet be supported by that cost alone.
Spotify is currently looking for $500 million from investors to make up the difference, while other streaming providers like Amazon, Apple and Google use streaming music as a gateway into other products they offer.
However, Rhapsody has taken a different approach in the past. Last year, Rhapsody got two $5 million loans from RealNetworks and another, unnamed investor. The streaming music service could once again look to its existing shareholders for funds instead of turning to the stagnant venture capital world.