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News April 30, 2020

Spotify posts ‘healthy’ first quarter despite Coronavirus crisis

Senior Journalist, B2B
Spotify posts ‘healthy’ first quarter despite Coronavirus crisis

The COVID-19 pandemic hasn’t ruined the Spotify party.

It’s no Netflix, but the streaming giant managed to add six million “paid” subscribers as the health emergency kicked off. Revenue was up, ad sales slowed and business was largely “healthy” in the three months ending March 31.

During the period, the Sweden-based tech giant’s user base grew from 124 million to 130 million subscribers and 286 million total monthly active users, against 271 million at the close of 2019.

The 300 million user milestone should come up sometime during the current quarter, or the next.

spotify wall street

Spotify on Wall Street

Also, revenue grew by 22 per cent to €1.85 billion (AUS$3.07 billion), though ad sales were soft particularly in March, the month the novel Coronavirus was declared a pandemic, as the company saw “deceleration across all sales channels as previously booked business was cancelled or paused, and programmatic buyers pulled back spend.”

Subscriber income generated the lion’s share of all revenue at €1.7 billion, up 23% from the year-before period and ahead of company’s expectations.

Ad-supported revenues grew 17% year-on-year to €148 million, but fell short of Spotify’s forecasts as a result of disruption caused by the global health crisis, particularly in the final three weeks of March.

“Our business remains very healthy,” notes Spotify in a statement released to investors, and “despite some changes in listening patterns,” the outlook for the year ahead is optimistic.

Exploring the fallout from COVID-19, the company reported a drop in usage in car, wearable, and web platforms, beginning in late February and hard hit countries like Italy and Spain saw “a notable decline” in consumption and daily usage. Recruitment has slowed as a result. However, in the last few weeks, the company reports, listening numbers had started to rebound “and in many markets, consumption has meaningfully recovered.”

Spotify’s solid quarter should give the music industry some comfort in a bleak period during which the global touring market has ground to a halt, all live shows are off and streaming music has reportedly fallen well behind on-demand TV as the go-to lockdown platform.

The market leader Netflix hoovered up almost 15.8 million new subscribers in the first quarter, and now boasts about 183 million subscribers around the globe.

That burly growth easily eclipsed Netflix’ own guidance of about 7 million subscribers and almost doubled Wall Street’s expectations of nearly 8 million.

Daniel Ek on stage

Spotify CEO Daniel Ek

It’s worth noting, Spotify’s average revenue per user (ARPU) was down by 7% at constant currency in Q1, to €4.42 million, due to the continuation of longer free trials rolling over from the fourth quarter of 2019.

According to MBW, that’s the first time Spotify’s ARPU has fallen to less than half the €9.99-per-month subs price it launched in Europe back in 2008.

During a conference call with analysts, company co-founder and CEO Daniel Ek shared some insights into listening behaviour and growth, and admitted Q1 2020 was the streamer’s biggest-ever quarter for podcast creation.

“It’s hard to stay what behaviours will stick post-lockdown,” Ek said. “If I had to guess I’d say people will stay on new [formats], and we may see greater engagement in car [useage] as people return.” But in terms of catalog consumption, Variety quotes Ek as saying, “I expect that will shift as more new releases come.”

This article originally appeared on The Industry Observer, which is now part of The Music Network.

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