Spotify Greenroom

We reported on Spotify’s latest financial results yesterday, but there is plenty of follow-on material this morning, including some from the company’s filing with US financial regulator the SEC. For example, recent acquisition prices.

Spotify paid €57m (around $67.7m) in cash for Betty Labs, the startup behind Clubhouse-for-sports app Locker Room, which has since been rebranded as Spotify Greenroom. Meanwhile, it paid €45m ($53.4m) for podcast discovery startup Podz, including €36m in upfront cash. The filing also reveals plans to spend around €52m in the next year on building out office space in LA, Miami, Milan and Stockholm among other cities.

What else? TechCrunch has a piece based on data from app analytics firm Sensor Tower, which claims that the Spotify Greenroom app has been downloaded more than 141k times on iOS so far, although given it’s been very much a soft launch, this isn’t a disaster. The article has a useful table tracking installs of the various live / social audio apps: including Yalla from the Middle East; Lizhi from China, and new players like Fishbowl, Cappuccino and Riff.

You want proper juice, though? Try the Financial Times’ spiky piece on Spotify’s much-discussed ‘Discovery Mode’ – and specifically on what it claims is a lack of support, so far, from the biggest music companies.

“So far the reaction from the major labels has ranged from lip service to staunch opposition, according to interviews with more than a dozen executives in the music industry,” reported the FT. “None of the three major labels is testing Discovery Mode, according to five people close to the situation.” Quotes from anonymous major-label executives like “very borderline if not directly payola” won’t go down well at Spotify HQ, but could also arouse more interest from regulators and politicians.

Finally, Spotify held an earnings call with analysts following its financials announcement yesterday. CEO Daniel Ek shed more light on why the company missed its targets for monthly active users. “There is a lot to learn for us on the MAU shortfall. Markets like India, Brazil and parts of south east Asia lagged behind our expectations and we’ve also seen a slightly slower adoption rate in some of our newly launched markets. All these regions have been hard hit by Covid,” he said.

(How does Covid-19 affect adoption of a music streaming service that is free on its basic tier? Ek suggested that tougher lockdowns mean “less mobility… and more mobility leads to higher engagement, which tends to lead to higher retention and better MAU”. However, he also noted that Spotify has “cut back on marketing and advertising pretty significantly” in countries where Covid-19 was hitting hard.)

Ek also flagged up Spotify’s strong growth in advertising revenues. “Admittedly, this is an area where I previously didn’t spend much time, but it’s become impossible to ignore,” he said. “It’s clear to me that the days of our ads business accounting for less than 10% of our total revenue are behind us…going forward I expect ads to grow to be a substantial part of our revenue mix.”

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Stuart Dredge

Music Ally's Head of Insight

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