Spotify Hits 299 Million Active Users in Q2, Says Listening Hours Bounced Back to                ‘Pre-COVID Levels’

Spotify Hits 299 Million Active Users in Q2, Says Listening Hours Bounced Back to ‘Pre-COVID Levels’

Welcome to WMusic and podcast streamer’s net loss balloons on stock-related costs

By Todd Spangler

Spotify’s user and subscriber growth came in at the top end of expectations for the second quarter of 2020, but the company’s bottom line was hit by a 48% increase in operating costs from stock-related compensation charges. In addition, ad revenue fell 21% — which Spotify blamed on the coronavirus pandemic — but the drop wasn’t quite as bad as forecast.

Total monthly active users grew 29%, to 299 million, a sequential increase of 13 million. The company added 8 million Spotify Premium subscribers globally in Q2, up 27% year over year to 138 million. “Our business performed well in Q2 and continues to operate at a high level despite the continuing uncertainty surrounding the COVID-19 pandemic,” Spotify said in its Q2 letter to shareholders.

According to Spotify, after a “modest” drop in consumption hours driven by COVID in Q1, as of June 30 “global consumption hours have recovered to pre-COVID levels.” At this point, all regions worldwide including North America and Europe have “fully recovered” — with the exception of Latin America, which is about 6% below peak levels prior to the global health crisis, the company said.

Spotify forecast continuing user and subscriber growth through the back half of 2020. For Q3, Spotify expects total monthly active users to be 312 million-317 million and Premium subscribers to be 140 million-144 million. For the fourth quarter, the company is projecting total MAUs of 328 million-348 million and total Premium subscribers of 146 million-153 million.

But even with tailwinds driving up its user base, Spotify’s financial results — ironically — were hurt because of the company’s strong stock performance in the period. Total revenue for Q2 of €1.89 billion was up 13% year over year, in line with expectations, while Spotify’s net loss ballooned to €356 million (versus €76 million in the year-ago quarter). Average revenue per user among Premium subs of €4.41 in Q2 was down 9% year over year (down 7% excluding impact of foreign-exchange rates).

The red ink stemmed from higher than expected “social charges,” which were €126 million higher than forecast in Q2 because of gains in the Spotify stock price during the quarter. What Spotify calls “social charges” are payroll taxes associated with employee salaries and benefits, including share-based compensation that the company is subject to in various countries.

Spotify’s stock price surged after the company announced a multiyear exclusive licensing deal for Joe Rogan’s “The Joe Rogan Experience,” which will debut on the platform in September 2020 and become exclusive later this year.

Overall, podcast advertising “outperformed” in Q2 with “momentum continuing into July,” the company said (but didn’t break out podcast ad revenue). Additionally, Spotify announced a $20 million advertising partnership with Omnicom Media Group, which the company said it believes is the biggest global podcast ad pact to date.

About 21% of total Spotify users listen to podcasts, up from 19% in Q1 2020. Podcast consumption continues to grow at “triple-digit rates” year over year, the company said, although it does not disclose metrics on this front. Currently, Spotify’s podcast catalog includes over 1.5 million shows, 50% of which launched in 2020.

Earlier this month, as part of its efforts to keep the podcast flywheel spinning, Spotify launched its first video podcasts with select creators. It recently announced deals for exclusive podcasts with filmmakers Mark and Jay Duplass, TikTok star Addison Rae, Warner Bros. and DC Entertainment, and Kim Kardashian West. “The Michelle Obama Podcast,” with former President Barack Obama as her first guest, debuted Wednesday.

Spotify’s service is now available in 92 markets worldwide, after launching in Russia and a dozen other European markets earlier this month.

Last week, Spotify and Universal Music Group announced a multiyear global music licensing and marketing pact under which UMG — the biggest music company in the world — agreed to pay to promote artists on the streaming platform.

View original article Variety

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