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Music streaming pioneer Spotify earns more than £1m a month from its premium subscribers, OUT-LAW.COM can reveal. Earnings could be as high as £72m a year. The figure is derived from statements made by Spotify executives.

Spotify has been reluctant to reveal how many of its users have upgraded to its premium version. Costing £9.99 a month this allows users to hear music without adverts being played every few songs, and allows them to use other applications such as the Spotify iPhone application.

OUT-LAW.COM can reveal that that figure is between 100,000 and 600,000 people in the six countries in which the service has launched. That translates into monthly earnings of £1m to £6m per month, and annual earnings of between £12m and £72m.

Spotify's director of content Niklas Ivarsson revealed last night that the number of users who have upgraded is "in six figures". Ivarsson was speaking at an event organised by the Scottish Society for Computers and Law (SCCL) in Edinburgh.

Company chief executive Daniel Ek told an event for entrepreneurs in London two weeks ago that the number of subscribers was fewer than 10 per cent of the total number of users. "It’s not double digits yet, but we think we can get there," he said, according to TechCrunch.

Spotify confirmed to OUT-LAW.COM that it has six million users. That means that the number of paying users is between 100,000 and 600,000, spread across the six countries in which it has launched, which are Sweden, Finland, Norway, France, Spain and the UK.

Most users register with the company, download its software and listen to songs for free as they are streamed over the internet. An advert is played every few tracks.

Spotify's business model is an issue of intense interest to the internet and music business worlds. It is the only company to have managed to convince all the major record labels to allow their music to be streamed for free.

Its costs and earnings have been, till now, secret, though many have made estimates. Industry observers told The Times newspaper last month that in July of this year the company streamed 700m songs at a cost of around £3m. The paper estimated that advertising income is running at about £60,000 a month.

[The Register was the world's first to disclose Spotify's subscriber and revenue in July. Advertising revenue was 14p per subscriber in the UK. - Ed.]

At the SCCL event, Ivarsson also revealed the surprisingly small outlay the company has made on promotion of its services. He said that the company had spent just €2,000 on marketing in the UK. It is believed to have spent just €30,000 on marketing in all of Europe.

"We don't comment on financial details," a Spotify spokesman told OUT-LAW.COM.

Copyright © 2009, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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