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Spotify Now Has 232 Million Users, But Only Half of Them Pay for Music

The music-streaming service reports strong user growth, though it’s adding fewer paying customers than expected

Editorial Use onlyMandatory Credit: Photo by Olly Curtis/Future/Shutterstock (10139252s)An Android Smartphone With The Google Play App Store Open And The Spotify Music Application Visible On Screen2018 Apple MacBook Air Product Shoot - 19 Nov 2018

Spotify reports 50 percent growth in its podcast audience since last quarter.

Olly Curtis/Future/Shutterstock

On Wednesday, Spotify reported its second-quarter earnings with both happy and unhappy news alike: The Swedish music-streaming giant now has around 232 million people around the world using its service each month, marking a 29 percent increase in audience from last year — but the number of paying subscribers within that user base is just 108 million, representing a smaller boost than expected from the previous quarter’s 100 million.

Interest from new streaming users in signing up for its promotional deals, such as its discounted student monthly rate, was “below plan” this quarter, and “that’s on us,” Spotify said in a note to investors, adding, “The good news is that the shortfall was execution-related, rather than softness in the business, and we expect to make up the lost ground before year-end.” Spotify reported total quarterly revenue of €1.67 billion ($1.86 billion), which marks a 31 percent expected increase, and it posted a smaller-than-anticipated loss, cheering the Wall Street analysts who believe the company is finally heading toward profitability soon. CEO Daniel Ek said on a call with investors that Spotify believes that it is adding global subscribers at twice the rate of Apple Music.

The company pointedly highlighted that its podcasting business — in which it’s aggressively investing — have seen audience growth of more than 50 percent from last quarter. Spotify also told investors that it’s currently working on renewing deals with its four major record label partners (Sony, Warner, Universal, and indie rights agency Merlin) and has two of them secured thus far — but while “this is the sixth round of label negotiations we’ve worked through in our thirteen year history” and that “it has become part of the normal cadence of the business,” this is the first round of discussions in which Spotify is actively building out provisions for a “two-sided marketplace” wherein the streaming service could charge artists and labels for its (currently free-of-charge) analytics services.

Shares dipped 5 percent to $146 in early trading and were hovering around $151 at press time.

Apple posted quarterly results this week as well. While the Cupertino giant doesn’t break out revenue or monthly active users for Apple Music in particular in earnings reports, it announced record revenue of $11.5 billion for its Services unit, which includes Apple Music and other software. Senior vice president of internet software and services Eddy Cue said at the end of June that the music-streaming service had amassed 60 million subscribers, up from 50 million in April.

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