Spotify published its latest quarterly financial results earlier today, followed by an earnings call with analysts in which CEO Daniel Ek talked about its just-announced acquisition of media and podcasts firm The Ringer.
“If you up-level this conversation and think 10 years out, the trend we’re investing in is that radio is moving online, because users get a much better user experience. It’s on-demand, it’s tailored to their needs,” said Ek.
“With The Ringer, I think we bought the next ESPN, and that’s going to be a tremendously valuable property.”
The call also saw Ek make a claim that will be pricking up ears in Apple’s headquarters, given the latter company’s past embrace of external estimates that Apple Music had more listeners than Spotify in the US.
“By some estimates now, we should be the largest US audio-streaming service as well, so we feel really good about that,” said Ek, in his answer to a question about the geographic breakdown of Spotify’s monthly active user (MAU) growth.
One puzzling moment came when an analyst suggested that Spotify’s net subscriber adds in 2019 – 28 million – was ‘higher than Apple, Amazon and YouTube combined’.
That seems far-fetched. Apple Music grew from 50 million subscribers in late January 2019 to 60 million in late June, and if that rate had continued, it would have been on course to reach 70 million by the end of December – and thus 20 million net adds for 2019 as a whole.
Amazon recently announced that it now has 55 million streaming customers, “nearly all” of whom are paying for a subscription, while YouTube’s parent company Alphabet revealed this week that it now has 20 million subscribers across its YouTube Music and YouTube Premium tiers.
For both companies, it was the first time they had published these metrics, so tracking their additions in 2019 is a guessing game. But it’s fair to suggest that Apple, Amazon and YouTube combined almost certainly exceeded Spotify’s 28 million adds last year – which is not to pooh-pooh the latter achievement.
Ek did not correct the analyst, but he talked about a different (albeit unquantified) user metric. “In earlier shareholder letters, you’ve seen us comment that we see much higher engagement among Spotify users than we do among competing services, and we think that leads to better retention,” he said. “And retention in the subscription world is really the game.”
During the call, Ek also reiterated Spotify’s not-so-coded message to labels that growing podcast listening isn’t something they should feel defensive about. “Podcast users not only are more engaged overall, but because of that engagement they’re also listening to more music,” he said.
CFO Paul Vogel repeated Spotify’s past claim that it doesn’t expect “much change” to its royalty rates as a result of its current licence-renewal negotiations with major labels, while Ek noted that “we feel comfortable about the outcome, but the timing is difficult to predict” for all those deals to be sealed.
On podcasts, Ek suggested that “internationally, by some third-party estimates, we’re now number one in many of those markets” but said it’s “tricky to get accurate measures” in the US to gauge how Spotify’s share of podcast listening is growing at rivals’ (i.e. Apple’s) expense. “Generally speaking what we can say is we’re taking market share pretty much in all territories that we’re in,” he said.
Spotify is also building tools to generate more money from advertising in its own podcasts that could, in time, also be made available to external podcast producers.
“As it relates to third party content… right now all monetisation is their own and we’re not participating in that,” said Ek. “As you look at the advertising opportunity going into 2020, part of that is also experimenting with ad tools, and quite a few of them have the potential of being very powerful for third-party podcasters as well.”
Ek also fielded a question about social features, and what Spotify might be planning on that front. He noted that “what most people associate with social… is user-to-user networks of people talking about music and exchanging songs”. Spotify sees it differently.
“Over time the strong goal for us in social is to connect artists and fans directly. We think that’s the most powerful thing we can do,” he said. “You should expect that over user-to-user communication.”
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