By Anne Steele
Spotify Technology SA moved past a slump that hit early in the
pandemic, as customers collectively spent more time listening to
the service than before Covid-19 shutdowns.
The music-streaming company added more users than expected in
the most recent quarter and said consumption habits have
normalized, with in-car listening hours -- which had fallen with
time spent commuting -- exceeding their prepandemic peak. Listening
on home devices, which exploded during lockdowns, also remained
At the close of the quarter ended Sept. 30, Spotify had 320
million monthly active users, higher than its guidance. Paying
subscribers, its most lucrative type of customer, grew to 144
million, at the high end of the company's forecast.
"We know that when we reach more listeners, we're able to
attract more creators to our platform. So with more reach comes
more content and with more content, especially content unique to
Spotify, there comes more opportunities to monetize," said Chief
Executive Daniel Ek. "Bottom line, as I look at the increase
specifically in reach that we are seeing this quarter, it gives me
confidence in our ability to monetize that growth."
During the quarter, average revenue per user for the
subscription business slipped 10% to 4.19 euros, equivalent to
$4.92, as Spotify brought in new subscribers via discounted plans
and charged lower prices in new markets such as India and Russia.
The company said it had raised the price of its family plan in
seven markets this month.
"Initial results indicate that in markets where we've tested
increased prices, our users believe that Spotify remains an
exceptional value and they have shown a willingness to pay more for
our service," said Mr. Ek. "You will see us further expand price
increases," he said, adding that the company will be cautious about
price increases during the pandemic.
Revenue from subscriptions was up 15% from a year earlier in the
quarter, to EUR1.79 billion, equivalent to $2.1 billion.
Advertising revenue returned to growth after sliding in the first
half of the year, rising 9% to EUR185 million. Though advertising
accounts for 10% or less of Spotify's overall revenue, it has
become a growth area -- on a double-digit rise before the pandemic
-- as the company has expanded its podcast business, which led the
rebound in the recent quarter.
The company said it now has 1.9 million podcasts available on
its service, and during the period 22% of its monthly active users
listened to one, up from 21% in the previous quarter. Spotify's own
original and exclusive podcasts -- the shows from which it can draw
ad revenue -- now account for 19% of all podcast listening on the
service. "The Michelle Obama Podcast," a Spotify exclusive launched
in July, was the most-listened to podcast through August. "The Joe
Rogan Experience," which arrived on Spotify in September, is now
the No. 1 show in all of the service's English-language markets,
the company said.
With Mr. Rogan's podcast becoming exclusive to the service this
fall, and strong growth from Bill Simmons's podcasts on the
platform, "the ability to monetize those things going into 2021
will increase," said Spotify finance chief Paul Vogel.
Mr. Rogan drew criticism this week -- both from listeners and
Spotify employees -- for releasing a podcast featuring right-wing
provocateur Alex Jones, whose own content has been removed from
other platforms for violating hate speech policies. On Instagram,
Mr. Rogan defended his controversial guest.
"He said a lot of crazy but accurate things, and that's what
I've been saying about him for years," said Mr. Rogan.
"The most important thing for us is to have very clear policies
in place. We have millions of creators on Spotify, and we
consistently evaluate all that content we have on Spotify and
evaluate that against same policies and principles," said Mr. Ek.
"It doesn't matter if you're Joe Rogan or anyone else, we do apply
those policies and they need to be evenly applied."
In music, still the main draw to the service, new releases were
up 13% over the previous quarter.
Revenue climbed 14% to EUR1.98 billion, in line with
Spotify swung to a loss of EUR101 million, or 58 European cents
a share, in the third quarter, from a profit of EUR241 million, or
36 European cents a share, a year earlier. While the company has
periodically reported a quarterly profit, executives have said it
would continue to give priority to growth -- attracting new
subscribers and investing in podcasts.
Free cash flow, a measure of the cash a company generates from
operations -- viewed by many investors as a proxy for performance
-- was EUR103 million, more than double the EUR48 million a year
For the fourth quarter, the company forecast growth in monthly
active users to between 340 million and 345 million, and in premium
subscribers to between 150 million and 154 million. It guided for
revenue of EUR2 billion to EUR2.2 billion.
News Corp's Dow Jones & Co., publisher of The Wall Street
Journal, has a content partnership with Spotify's Gimlet Media
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
October 29, 2020 10:37 ET (14:37 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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