Report indicates streaming will never be profitable...as Spotify prepares to go public

The common story, as heard from musicians and music industry officials, is that Spotify and similar streaming service providers are evil and are killing new music. That may still be true, but Spotify et al aren't sitting on bags of money as a result of their products either. A study by Generator Research indicates that streaming services stand virtually no chance of ever becoming profitable.

Numbers provided from Generator's report indicate that the number of people using streaming sites will be around 1.7 billion in 2017, adding nearly a billion listeners from current numbers. With that, the number of paid subscribers will rise from 36 million today to an estimated 125 billion. That means 7.35 percent would pay for service, compared to 4.7 percent today. It's an increase, but not nearly enough.

Generator says that without a restructuring of royalty rates, streaming services don't stand much of a chance. The research group claims record labels get almost 70 percent of their royalty payments from subscribers. A restructuring seems unlikely, as labels already complain that what they get from Spotify and co. is unfair. The results of Generator's findings seem to be in play with the shutdown this week of Indian streaming service Dhingana.

This all comes amid rumors that Spotify is aiming to go public in the near future. A job advertisement appeared on the service's site and LinkedIn this week, calling for an "Extrenal Reporting Specialist" to "prepare the company for SEC filing standards. Set up all reports necessary to be SEC compliant."

If investors have read Generator's report, they might think thrice before being bullish with Spotify.