Music streaming leader Spotify passes 87m premium subscribers

1 Nov 2018

Spotify on a mobile device. Image: simpson33/Depositphotos

Music streaming giant Spotify has posted its Q3 earnings for this year, meeting analyst expectations by the skin of its teeth.

The world’s most popular music streaming service, Spotify, unveiled its financial results for the third quarter of 2018, months after its New York Stock Exchange debut in April.

Premium subscribers now stand at 87m globally, keeping the Swedish firm well ahead of nearest rival, Apple Music. Bundle plans such as Family and Student deals are helping lock in users, as well as potential partnerships with Hulu and Showtime in the works. Apple Music has approximately 50m users at the time of writing.

Modest results

The results showed modest growth, just about hitting predicted figures from analysts. It announced it made €1.35bn in revenues for the quarter that ended in September, a fraction higher than the expected estimate of €1.33bn. The company’s operating loss is now at €6m, an impressive 92pc improvement year on year.

Spotify owns shares of Tencent Music Entertainment Group, classified as long-term investments. The investment required a “mark-to-market adjustment of the fair value” of the investment, resulting in a tax benefit. This resulted in a net income for the first time in the company’s history, but this is unlikely to remain so for ensuing quarters.

Tech stock fears having an effect

Stock in Spotify has been undergoing a fair amount of turmoil in the last few months, as worries about sustainability and shaky faith in technology shares took their toll. The company also warned that there will be further dents made in profit in the next number of months.

A festive season partnership with Google Home to offer Google Home Mini speakers to Spotify Family subscribers is expected to affect the end-of-year figures. “We anticipate that this partnership will have an adverse impact of approximately 50 basis points on our gross margin profile in Q4.”

Free user base is growing

While Premium users are growing, the free user base has also flourished, increasing by 20pc to 109m ad-supported monthly active users (MAUs). Across the board, 191m people use Spotify in some form at least once monthly – 28pc higher than this time in 2017. By the end of the year, Spotify predicts it will have between 199m and 206m MAUs.

The company also discussed the issues it faces when it comes to inauthentic users. It said: “We continue to work to identify and remove users that we consider to be ‘fake’ from our reported metrics. This includes, but is not limited to, bots and other users who aim to manipulate stream counts for purposes of royalty calculations.

“Such users are removed from our metrics in a timely fashion once they are discovered. However, some such users may remain in our reported metrics because of the limitations of our ability to identify their accounts.”

Spotify on a mobile device. Image: simpson33/Depositphotos

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects