Spotify has published its financial results for the second quarter of 2021. The streaming service now has 365 million monthly active users (MAUs) including 165 million premium subscribers.
Spotify added nine million users and seven million subscribers during Q2. It had predicted that it would end the quarter with 366-373 million MAUs and 162-166 million premium subscribers, so it has fallen short on the former metric.
“MAU performance was slower than expected due primarily to lighter user intake during the first half of the quarter,” is how Spotify explained that.
“Covid-19 continued to weigh on our performance in several markets, and, in some instances, we paused marketing campaigns due to the severity of the pandemic. Separately, a user sign-up issue associated with a global third party platform created unexpected intake friction, which also impacted MAU growth. This issue has since been resolved.”
We’ll be interested to see if analysts ask about the identify of that ‘third-party platform’ in Spotify’s earnings call later. Facebook is the obvious candidate, but we’ll wait to see what Spotify’s executives say. “Overall, we saw a return to better growth patterns in the back half of the quarter,” added the company in its financials.
Spotify’s revenues grew by 23% year-on-year to €2.33bn (around $2.75bn), with its premium subscription revenues growing by 17% to €2.06bn (88.2% of the total), and its ad-supported revenues more than doubling – up 110% – to €275m (11.8%).
Is it in the black? Spotify reported an operating profit of €12m in Q2, its second quarter in a row of operational profitability, and a big jump from the €167m operating loss it posted in Q2 2020. The company’s net loss for the quarter was €20m.
Other notes from the financials announcement:
– Spotify’s average revenue per premium user was €4.29, down 3% year-on-year, but up from €4.12 in the first quarter of this year. The company’s recent price increases in various regions appear to be taking effect.
– Spotify’s gross margin – its gross profit as a percentage of its revenues – has grown from 25.4% a year ago to 28.4% now, above its guidance to analysts. That is driven by “a favourable revenue mix shift towards podcasts, marketplace activity, and Other Cost of Revenue efficiencies (e.g. payment fees, streaming delivery costs)” according to the financials.
– Spotify has been expanding aggressively beyond its existing core territories of Europe, North America and Latin America, but it’s not yet seeing growth take off outside those three continents. That ‘Rest of World’ segment accounted for 20% of its MAUs in Q2, the same as in Q1. That means Spotify only added around 1.8 million net new active users across all those countries (think India, South Korea, Russia, Africa…) in Q2. As for premium subscribers, it only added around 0.8 million of them in that ‘Rest of World’ segment, which maintained its 11% share of Spotify’s overall subs.
– Spotify’s audience for podcasts continues to grow, although the company broke with its recent tradition of giving a specific figure for the percentage of its MAUs who listen to podcasts. It said only that this percentage “improved modestly relative to Q1” (when it was around 25%). If it were still 25%, that would be around 91.3 million podcast listeners, and so barely a couple of million added in the last quarter.
– There are some stats on Spotify’s controversial (see here) Discovery Mode, which offers a promotional boost to tracks in return for a lower royalty rate. “Thus far, artists with tracks in Discovery Mode have found over 40% more listeners on average compared to pre-Discovery Mode,” says Spotify. “Additionally, 44% of those listeners had never listened to the artist before.” The company says it is planning a broader rollout for the feature “later this year”.
– Spotify is also planning a “full commercial launch” of its Clubhouse-style Spotify Greenroom app later this year. The app is a rebranded version of sports-focused Locker Room, which Spotify acquired earlier this year. The new version soft-launched recently, but Spotify says the full launch will have “an initial focus on sports, pop culture, music, and entertainment”.
– Spotify expects to have 377-382 million MAUs by the end of Q3, including 170-174 million premium subscribers. By the end of 2021, it is predicting 400-407 million MAUs and 177-181 million premium subscribers. Three months ago, it was predicting year-end totals of 402-422 million MAUs and 172-184 million subscribers.