Spotify Has More Users Than Ever, But It's Still Losing Money - Rolling Stone
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Spotify Has More Users Than Ever, But It’s Still Losing Money

The audio-streaming service has nearly 300 million users — up 67 million from last year — but both its ad revenues and premium ARPU have dipped

POLAND - 2020/04/10: In this photo illustration a Spotify logo  is seen displayed on a smartphone with a  COVID 19 sample on the background. (Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Images)

Spotify revealed nearly 300 million users in its quarterly report, but its ad revenues and premium ARPU have dipped.

Omar Marques/SOPA Images/LightRocket/Getty Images

“I’ve never been more bullish about where we are today,” Daniel Ek, the CEO of Spotify, said to investors on the streaming service’s second-quarter (Q2) earnings call Wednesday morning.

But the company proceeded to report a 21% year-over-year loss in advertising revenue, as well as a 9% year-over-year drop in its premium monthly average revenue per user (ARPU) — and overall in Q2 2020, the NYSE-listed Swedish company posted a loss of €356 million, or $419 million.

The financial results stand in stark contrast to achievements by other measurements. In the last quarter, Spotify hit a high of 299 million monthly active users, 138 million of whom are paying subscribers via Spotify’s premium tier. The company also says users’ overall podcast consumption has more than doubled, and one-fifth of monthly active users are listening to podcasts — promising signs for the company’s aspirations to diversify its business away from the music industry and become a music-and-podcasting juggernaut. (If you’re struck by déjà vu from Wednesday’s mixed bag of results, it’s warranted: Spotify has been consistently hitting new growth milestones while suffering large losses for years.)

Dips in ad revenue and general revenue have much to do with COVID’s impact on normal operations. But for investors and music-industry executives, the most troubling figure out of Wednesday’s results may be Spotify’s low premium ARPU: While the service charges a standard rate of $9.99 a month for ad-free premium access, the actual average revenue from those subscribers is currently €4.41 ($5.17) — thanks to steep discounts in family plans, student plans, and cheaper prices in new global markets — meaning that labels, artists, and others in the music pipeline are also getting a smaller fraction of what they typically expect.

In an accompanying letter to investors, Ek specifically highlighted the company’s “audio-first strategy,” calling out exclusive deals it has signed with Michelle and Barack Obama, Joe Rogan, and DC Comics. Ek also flagged Universal Music Group’s new licensing agreement, which will see UMG leveraging Spotify’s Marketplace tools to help artists “connect with fans, grow their audience, and better monetize their fanbase,” as well as Spotify’s recent launch in Russia and 12 other European countries.

Spotify’s stock took a small tumble of around 3.7% on the news, but has regained slightly as of the first two hours of trading.


In This Article: Spotify


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