Spotify is a rare breed of music provider: they give music for free. This type of service instantly attracts followers, but can it sustain itself with such a business model? While currently unavailable in Canada, Spotify has brought in many new users over the past few years and its revenue increased by 151% from 2010 to 2011.

But, the operating costs nearly tripled over those years, causing an overall loss in profit.

Spotify’s plan is to first attract users with the promise of free music, then convince them afterwards to buy the premium plan they offer. For only $10 a month, users can have an almost unlimited supply of music in their pocket at all times. Yet, the business is struggling to convert users to this plan and as a result, Spotify has been unable to meet to cost of supplying so much free music.

While its fan base is growing at a very fast pace, Spotify may need to reevaluate its business model. As of now, it attracts users via its point of difference–unlimited free music–but needs to figure out a way to do so while getting more money or lowering costs. Even a small change could affect its appeal to followers though, and Spotify will need to sacrifice something huge in order to be profitable.