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Spotify Q2 2020 financial results reveal Covid-19 impact


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The early weeks of the Covid-19 pandemic’s global spread didn’t hamper Spotify’s growth in the first quarter of this year. But how about Q2, the first full quarter (near enough) of lockdowns, furloughs and financial uncertainties across much of the world?

Today we have our answer, with Spotify’s latest quarterly financial results. The streaming service ended Q2 with 138 million subscribers and 299 million monthly active users, having added eight million and 13 million respectively that quarter.

Meanwhile, Spotify generated revenues of 1.89bn in Q2, up by 13% year-on-year. It recorded an operating loss of €167m and a net loss of €356m for the quarter.

What about that Covid-19 impact, though? In its guidance for analysts published in April alongside its Q1 financials, Spotify had said that it expected to reach 133-138 million subscribers and 289-299 million monthly active users by the end of Q2, while generating revenues of €1.75bn-€1.95bn.

Spotify’s Q2 thus hit the higher end of its expectations for listeners and subscribers, and also sat comfortably high in its revenue forecast.

“Our business performed well in Q2 and continues to operate at a high level despite the continuing uncertainty surrounding the COVID-19 pandemic,” announced Spotify in its letter to shareholders.

“Early in the quarter, we observed some Covid related softness in several countries across our emerging regions. Parts of Latin America and Rest of World saw slower than expected growth in April and May as we saw lower intake, an increase in churn, and increases in payment failures from our Premium users,” it continued.

“Encouragingly, things rebounded significantly in June as we saw increased reactivations and a step down in churn. While we finished below forecast in aggregate across these regions, our strength in North America and other areas more than offset the slow start to the quarter.”

Spotify added that ‘global consumption hours’ – time spent listening to its service – have “recovered to pre-Covid levels” in all territories bar Latin America, which remains “approximately 6% below peak levels prior to the global health crisis”.

One place where Covid-19 had a noticeable impact was on Spotify’s advertising revenues, which fell by 21% year-on-year to €131m. However, subscription revenues grew by 17% to €1,76bn, and continue to be the lion’s share of Spotify’s total revenues.

Here are some more takeaways from Spotify’s Q2 2020 financial results:

– More on regions. By our calculations, Spotify added fewer than 1.6 million new monthly active users in Europe last quarter, compared to 3.4 million in North America, 2.9 million in Latin America and 5.2 million in the rest of the world. However, Europe was the region where it added most new subscribers: 3.1 million, compared to 2.3 million in North America, 1.7 million in Latin America and 900k in the rest of the world.

– Spotify’s conversion rate overall – the percentage of its listeners who are subscribers – now stands at 46.2%. It’s as high as 52.9% in Europe and 51.5% in North America; it’s 44.1% in Latin America; and 28.2% in the rest of the world (the only region where this percentage fell in Q2).

– The company’s average revenue per user (ARPU) for premium subscriptions was €4.41, down by 9% year-on-year.

– Spotify now expects to end 2020 with 328-348 million monthly active users and 146-153 million premium subscribers – similar to its forecasts a quarter ago, apart from the latter edging up from 143-153 million.

– 21% of Spotify’s monthly active users are now listening to podcasts, up from 19% in Q1 and 16% in Q4 2019. That’s around 62.8 million people, which is 8.5 million more than last quarter.

– More than 91,000 artists have used Spotify’s new Artist Fundraising Pick feature so far – that’s up from 50,000 three months ago.

– More than 690,000 artists are using the Spotify for Artists tools. Spotify also said that its ‘top tier’ artists – those accounting for the top 10% of its streams – now number more than 43,000, compared to 30,000 a year ago. “Gone are the days of Top 40, it’s now the Top 43,000,” is the soundbite on that.

Stuart Dredge

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