Daniel Ek on expanding Spotify in 2020

In the wake of Spotify revealing the numbers behind a strong 2019, CEO Daniel Ek and some of his lieutenants conducted a media conference with the financial market and media.

The platform’s latest figures drew a disparate response.

As far as the music and radio industries were concerned, more than a quarter of a billion people are using the platform each month (113 million subscribers), and more were using it to access podcasts.

But the financial markets were not so impressed, especially with its continued operating loss, and Spotify’s share price dropped 4%.

Yet Ek remains confident about the future for the world’s largest streaming service.

Looking ahead to 2020, Spotify expects to add between 2-7 million premium subscribers in Q1 and possibly smaller operating losses.

By the end of the year, it is targeting between 143— 153 million subscribers and 328— 348 million total monthly active users (MAUs).

“Our goal (is to become) the world’s No. 1 audio platform,” says Ek.

Here are 7 takeaways from the investors’ call:

1. Its Number Of Creators, New Discoveries, Is Rising

Significant to Spotify’s future growth is that the number of creators engaging with the platform continues to increase (to over 3.9 million in Q1) and a “significant growth” in the discovery of new artists of Spotify.

Ek: “In Q1, we saw a 20% increase in the number of artists streamed on our platform year over year and a 29% increase in the number of artists with at least 100,000 listeners.

“We believe this engagement from artists, labels, and publishers shows a strong sign that there’s an increased appetite for more marketplace tools and services.

“With more than 50 million tracks now available on Spotify and growing by close to 40,000 daily, the discover tools we’re building has never been more important to consumers and artists alike.”

2. Podcast Hours and Volume Growing

By the end of December 2019, over 16% of Spotify’s 271 million MAUs were listening to podcasts, translating to about 43 million users.

That meant that the number of people accessing podcasts via Spotify grew by 23% (or 8 million) from Q3 2019.

Ek: “Podcast consumption hours (in Q4) grew by nearly 200% year-on-year. That is a global phenomenon. It’s not just a US phenomenon.”

3. Podcasting Leads To More Music Consumption

Ek: “Podcast users are not only more engaged [with Spotify] overall, but because of that engagement they’re also listening to more music.”

4. Increasing Discoverability For Podcasts

Ek: “It’s definitely a priority. Personalization is one of our core pillars of our strategy.

“There, we are obviously really, really far along in music. Podcast is a much newer space for us.

“The way we merchandise podcast, the way we recommend podcast is completely different. We are working on that and improving quarter over quarter.

“I think you can see it already today in the product compared to last quarter that there’s a tremendous amount of new things that are shipping.

“I think we went, in all honesty, from being an OK product at the beginning of 2018 to now a year later being best-in-class in this area.

“Of course, we want to expand on that and become an even better experience. And in there, personalization is absolutely key”

5. Expanding Subscription Options Globally

After testing the Premium Duo payment plan, for two people living under the same roof, in five markets – Colombia, Chile, Denmark, Ireland and Holland — there is every chance it can be expanded to Australia as part of a wider global roll-out.

Ek: “It’s still early, but we’re really encouraged by the early response and that we believe it’s going to be accretive to our MAU and sub number, if we will use it more widely.”

6. Anti-Competitive Issues With Apple

Ek was quizzed on the latest update on Spotify’s complaint with the European Commission of Apple’s alleged anti-competitive practises.

Ek: “We cannot yet say what the results will be because it’s really under evaluation on their end.

“We both probably know as to say at the same time as the rest of the market knows.

“What I can say personally from speaking to lots of regulators in and around that time as you think that there – this is the moment where these issues needs to be debated, and I think that there’s a willingness engaged on these questions.”

7. Downward Trend In Churn

Ek: “I think the long-term trend for churn will continue to be downward.

“Family plan, Student plan, it has lower churn.

“So you’ll continue to see strong growth in those plans. We expect that average to — churn to decrease and due to aging in the base.

“The couple of reasons for the increase in churn would be acceleration in growth, and we saw an acceleration in growth this quarter versus prior quarter.

“Then, secondly, we in some of our newer markets have gravitated toward shorter subscription plans.

“We’re experimenting with weekly and daily by way of sample, which may cause us over time to rethink the definition of subscription, but — so we see people coming in and out quickly.

“One last comment, and this is particularly important.

“In the latest quarter, we saw a dramatic increase in the number of rejoins.

“So 42% of gross adds in the quarter were previous users of the service, which means that more and more frequently, we’re seeing former users come back and rejoin.

“Some of them may have lapped because their prepaid debit card expired and looked like churn, but they reup the card and came back.

“Some are coming back just simply because it’s a better service.

“So just to put that in perspective, the rejoin rate grew at 36% year over year, which is more than twice the rate year over year in gross additions.

“So yes, churn ticked up slightly, but more and more previous users are coming back, which will be an important contributor to growth.”