Spotify has published its latest quarterly financial results, covering the final quarter of 2018.
The music-streaming service ended the year with 207 million monthly active users (MAUs) including 96 million premium subscribers. Those figures were up by 29% and 36% year-on-year, respectively. Quarter-on-quarter, they were up by 8% and 11%.
(This means Spotify’s conversion rate – the percentage of its listeners who are on premium subscriptions – is now 46.4%, up from 44.7% at the end of 2017, and 39% at the end of 2016.)
Spotify reported revenues of just under €1.5bn for the fourth quarter of 2018, up 30% year-on-year. That included a 30% growth for its subscription revenues to €1.32bn and a 34% growth for its ad-supported revenues to €175m.
Spotify recording an operating profit in Q4 2018 of €94m compared to a loss of €87m in Q4 2017. Meanwhile, the company reported a quarterly net profit of €442m, compared to a loss of €596m in that year-ago quarter. Bear in mind the impact of the December IPO of Tencent Music, which Spotify had a stake in, here.
Still, Spotify took the opportunity to trumpet its in-the-black figures. “For the first time in company history, operating income, net income, and free cash flow were all positive,” it noted in its financial release.
36% of Spotify’s listeners are in Europe, versus 30% in North America, 22% in Latin America and 12% in the rest of the world. For subscribers, the percentages are 40% in Europe, 30% in North America, 20% in Latin America and 10% in the rest of the world. Spotify said that “performance to date has exceeded our initial expectations” for its recent launch in the Middle East and North Africa.
“We also reached an important milestone as users listened to more than 15 billion hours of content on the platform during Q4. Importantly, engagement grew across both the Ad-Supported and Premium tiers,” reported Spotify.
Spotify’s average revenue per user (ARPU) was €4.89 in the final quarter of 2018. That’s a 7% year-on-year decline, which the company attributed to its growth in family and student plans.
Spotify also published its guidance for 2019. By the end of this year, it expects to have between 245 million and 265 million monthly active users, including 117-127 million premium subscribers. It’s forecasting annual revenues of €6.35bn-€6.8bn, but an operating loss of between €200m and €360m for the year.
The news came as Spotify confirmed it is buying not just one, but two podcast firms: Gimlet Media and Anchor. The former is a podcast production company, while the latter makes an app that people can use to create podcasts.
“The format is really evolving and while podcasting is still a relatively small business today, I see incredible growth potential for the space and for Spotify in particular,” wrote CEO Daniel Ek in a blog post announcing the deals.
“In just shy of two years, we have become the second-biggest podcasting platform. And, more importantly, users love having podcasts as a part of their Spotify experience. Our podcast users spend almost twice the time on the platform, and spend even more time listening to music. We have also seen that by having unique programming, people who previously thought Spotify was not right for them will give it a try.”
“Based on radio industry data, we believe it is a safe assumption that, over time, more than 20% of all Spotify listening will be non-music content.” The company currently has a catalogue of more than 185k podcasts on its platform.
There is more to come: “We want to acquire more, and have line-of-sight on total spend of $400-$500M on multiple acquisitions in 2019,” reported Spotify in its financials. “Growing podcast listening on Spotify is an important strategy for driving top of funnel growth, increased user engagement, lower churn, faster revenue growth, and higher margins.”
In the earnings call later on, CFO Barry McCarthy stressed that this $400m-$500m includes the two acquisitions announced today – it’s not additive to it.
Other notes of interest from the financials:
Spotify said that its pre-Christmas promotion with Google Home smart speakers was “better than expected” at boosting its premium subscriptions. “We believe home voice speakers are a critical area of growth, particularly for music and audio content, and we are evaluating a number of ways to explore and refine our offering in this arena,” said Spotify.
The company’s now-traditional Q4 promotion where people can get three months of Spotify Premium for a dollar also worked well. “Over the course of 6 weeks, almost 7 million subscribers were added through this campaign, including a single day record of almost 500,000,” reported the company.
More than 300,000 artists are using the Spotify for Artists platform every month, while more than 10,000 podcasters are using its podcast analytics, and more than 1,000 publishers have registered for the beta version of Spotify’s publishing analytics.
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