### Comment:
Correct me if I am wrong, but isn't it scalable in that they play ads? And if you pay for premium without ads that's just money in their bank. So wouldn't more millions of people using spotify make spotify more money?

### REPLY:
The issue is that Spotify’s primary cost driver is not, like most tech companies, fixed investments in R&amp;D or Sales &amp; Marketing, but rather marginal payouts to record labels. Basically, the more revenue Spotify makes the more its costs increase, which can be overcome at large enough revenue numbers, but limits the company’s long-term upside. Said in another way: their business model might be scalable, but profits won’t scale as well..

### END.