Spotify has published its latest financial results, for the final quarter of 2019, and thus the entire year too.
The music streaming service ended 2019 with 271 million monthly active users (MAUs), up 31% year-on-year, having added 23 million in Q4, and 64 million over the year as a whole.
124 million of those active users were premium subscribers: 29% growth in the last year, with 11 million having been added during Q4. In 2019 as a whole, Spotify added 28 million subscribers – an average of just over 2.3 million a month.
Spotify’s Q4 revenues grew by 24% year-on-year to €1.86bn, including 24% growth for its premium subscriptions (to €1.64bn) and 23% growth for its advertising revenues (to €217m). In that quarter, Spotify reported an operating loss of €77m and a net loss of €209m
For 2019 as a whole, Spotify’s revenues grew by 28.6% to €6.76bn. The company reported an operating loss for the year of €73m, and a net loss for the year of €186m – up from €78m in 2018.
“For the third consecutive quarter, total MAU [monthly active users] growth accelerated while Subscribers, Revenue, and Gross Margin all met or exceeded our expectations,” is how Spotify introduced the financial results.
The streaming service also talked up its podcasts push, while also clearly trying to tackle fears by labels that the growth of non-music listening on Spotify will squeeze their royalties eventually.
“We continue to see exponential growth in podcast hours streamed (up approximately 200% Y/Y) and are now seeing clear indications that podcast usage is driving increased overall engagement and retention,” is how Spotify put it. “We have seen early indications that our investments in podcasts are having a positive impact on conversion of free to paid users.”
More than 700k podcasts are now available on the streaming service. Spotify says that more than 16% of its total monthly active users now “engage with podcast content”. That’s 43.4 million people.
(Compare that to the end of Q3 2019, when nearly 14% of Spotify’s total users at that time were listening to podcasts – nearly 34.7 million people. That suggests Spotify’s podcast audience grew by nearly 8.7 million people in the final quarter of 2019.)
The message going out to labels seems clear though: even if podcasts cannibalise music listening, if they also make people more likely to start paying for Spotify, music rightsholders will feel the benefits.
“We have a growing body of evidence showing that there are significant benefits to engagement, retention, and conversion of users from Ad-Supported to Premium stemming from consumption of Podcast content,” claimed Spotify.
“We have seen benefits to retention on the order of several hundred basis points, which is a material change on a retention curve, for users that engage with spoken word content relative to those that haven’t, and early data indicates that these users are more likely to convert to Premium over time.”
Spotify also offered its forecasts for growth in 2020. By the end of this year, it expects to have between 328 million and 348 million monthly active users; between 143 million and 153 million premium subscribers; and generate annual revenues of between €8.08bn and €8.48bn – but with an operating loss of €150m-€250m.
Other notes of interest from the financials announcement include:
– “2020 will be an investment year” for Spotify, particularly around podcasts. That’s your explanation for the predicted operating losses, at least partly.
– Spotify’s growth “re-accelerated” in its three biggest regions: Europe, North America and Latin America, although its ‘Rest of World’ segment is still (unsurprisingly) its fastest growing region. Europe accounts for 35% of Spotify’s users and 40% of its subscribers; North America for 27% of users and 30% of subscribers; Latin America for 22% of users and 20% of subscribers; and the rest of the world for 16% of users and 10% of subscribers.
– Spotify’s average revenue per user (ARPU) for its premium subscriptions continues to fall: it was down 5% year-on-year to €4.65, although Spotify says much of this was driven by “the extension of the free trial period across our entire product suite in the quarter”.
– Spotify’s advertising revenues are still “slightly short of expectations”, which it partly put down to “a slower start than usual in Q4” relating to technical issues with a new order management system.
– This is interesting: Spotify talked about its two-sided marketplace driving “a combination of revenue through selling paid marketplace tools to creators and their teams, as well as content cost savings through negotiating more favorable licensing rates with certain segments of content suppliers”. It added that “for the full year 2019 paid marketplace tools combined with strategic licensing contributed more than €30 million in Gross Profit”, and predicted that this contribution will grow by more than 50% in 2020.
– Spotify’s beta test of ‘sponsored recommendations’ – the pop-up in its app telling listeners about new albums by artists they like – have seen average click-through rates and ‘listener conversion’ of more than 30% each, with “no noticeable effect on our Premium retention”. “Compared to a control group, we have seen sponsored recommendations drive a material increase in both saves and plays,” claimed Spotify.
Get A Free Music Ally Account
Access unlimited News articles on the site, PLUS a trial of Music Ally’s subscriber-only services, including our industry-leading daily Bulletin email.