Is Spotify’s global growth really going to plan?
Spotify has been making plenty of noise to investors on its focus on international markets to generate continued growth.
Its Q2 results in early August showed revenue up 24% toat US$1.85 billion, which exceeded forecast, while quarterly loss per share ($0.47, $0.12) was lower than expected.
Monthly active users (MAUs) was up 29% for the year.
Premium subscribers grew 8 million to 108 million, healthy but not the 8.5 million it had expected. Podcast users were up 50%.
Spotify announced at the release of the figures, “Outperformance was broad based, with most of our geographic regions growing faster than our expectations.
“Timing of certain global music releases yielded some incremental benefit, as did our launch on PlayStation consoles across the Middle East and Latin America.
“Of note, two markets that have been long tied to physical music distribution, Germany and Japan, both hit milestones during Q2, performing materially better than forecast.
“Additionally, our newest market India performed well and in line with expectations.
“However, the most significant source of upside has been improvement in long-term retention due to our continued product innovation, particularly evident in our emerging geographies.”
India is seen as textbook growth for the streaming service outside the major western music markets.
After launching in February, it scooped up 1 million users in the first week, and 2 million in a month, riding on high brand awareness and the rare offering of a free tier.
According to Spotify India managing director Amarjit Singh Batra, in its first six months, it is already “among the top three players” when it comes to consumption.
“We are ensuring that we make music more accessible in India,” he said.
In terms of growth in the next 12 to 18 months, he told YourStory, “ India is a value-conscious market, and we believe that users will pay for an experience they believe is made just for them, ranging from playlists and personalisation to payment options and brand engagement.”
“Though there are over 150 million audio-streaming listeners in the country, only 1% actually pay for music. So, when we talk about pure potential for growth, it’s huge.
“Our focus is on building a habit for streaming with the goal to bring the average consumption of Indian user at par with global benchmarks.”
The company also saw strong demand for its Spotify Lite, a scaled-down version that is now available in 36 developing countries.
However, an investigation by Music Business Worldwide found that Spotify’s biggest market is still Europe.
It is still adding more users across Europe and North America (a combined 7.5 million) than the 6.6 million in Asia, the Middle East and Africa combined.
MBW noted that of its 232 million Monthly Active Users at the close of Q2, 83.5 million (or about 36%) were based in Europe. The 5.3 million growth of European users more than doubled the 2.1 million quarterly take-up in North America (2.1 million) and Latin America (1 million).
In terms of subscribers, the 43.2 million in Europe and 32.4 million in North America make up 70% of its global paying customers.
In Q2, Europe’s subscriber base grew by 3.2 million and North Americas by 2.4 million.
Europe’s growth in fact exceeded that of the quarterly subscriber take-up in Latin America (1.6 million) and 800,000 in the rest of the world.
Clearly, Spotify CEO Daniel Ek has a lot more work to do before the expected plateauing of streaming consumption in the more mature music markets comes into play.