Spotify has issued its 2019 Q1 results with premium subscribers hitting the magic 100 million.
The streaming giant reported most metrics outperforming or reaching the high end of its guidance. But monthly active users of 217m (up 26% year-on-year) were at the mid-range of expectations.
Premium subscribers were up 32% year-on-year and 100m was the high end of the guidance. Spotify described it as an “important milestone” in the company’s history. With Apple Music reportedly beating Spotify in the US (though its global figure is roughly half that of Spotify), growth from Amazon Music across its range of services and the recent launch of YouTube Music, the 100m figure is a timely reminder of the Swedish streaming service’s status as global market leader.
“Spotify continues to be the driving force that has made music a growth industry again,” said CEO Daniel Ek on the earnings call. “We remain very optimistic about the rest of the year and our long-term opportunity to become the world’s largest audio streaming company.”
Ek noted that Spotify’s tools for artists were helping creators, with a 20% increase in the number of artists streamed on the DSP in Q1. There was a 29% increase in the number of artists at least 100,000 followers.
Subscriber growth was driven by promotions in the US and Canada, including Family Plan, the Google Home Mini offer and a price reduction on the Hulu bundle.
The Google Home offer has now been extended to the UK and France. The promotion enables new and existing Family Plan master account holders to claim a free Google Home Mini voice-activated speaker.
“We saw strong growth in Q4 and that led to the expansion of the partnership in Q1,” said CFO CFO Barry McCarthy. “We think that promotional programme has been quite effective for us.”
It comes as both Amazon and YouTube Music have launched limited free services tethered to their own speaker devices.
Spotify launched in India in February, which expanded the company’s reach to 79 countries. It now has more than 2m users in India.
“We are pretty excited about the growth in India – it’s faster than we were initially expecting,” said McCarthy.
We are pretty excited about the growth in India – it’s faster than we were initially expecting
Despite concerns about the impact on average revenue per user (ARPU) from growth in India, McCarthy said margins were stable.
“Margins across regions independent of price point are relatively equal,” he said. “From the margin perspective, expansion in those regions [Asia and India] works for the business.”
Spotify had a fallout with Warner Music in India and has angered the songwriting community with its Copyright Royalties Board appeal.
McCarthy said the CRB appeal would be a “long, drawn out process – it’s just the nature of the beast.”
During the earnings call, Ek confirmed that Spotify was trialling its dual subscription plan Premium Duo for two people living together.
“We are really encouraged by the early response and we believe it’s going to be [positive for] our AMU and sub number if we roll this out more widely,” he said.
Ek commented briefly on Spotify’s issus with Apple relating to competitors on the App Store.
“This is the moment the issue needs to be debated,” he said. “There’s a willingness to engage with the question.”
Ek also considered the potential impact of the Copyright Directive, which would require YouTube to be licensed like music streaming services.
“Our view is obviously that we want a landscape where we are competing on a level playing field, and where rights holders are getting paid for their content,” he said. “If Article 13/17 leads to more of that, we think we will do better.”
Total Q1 revenue of €1.511 billion (£1.3bn) grew 33% year-on-year. Premium revenue of €1.385bn (£1.19bn) in Q1 grew 34% year-on-year.
Average revenue per user was €4.71 (£4.06) in Q1, down 2% excluding the impact from currency fluctuation. Spotify said that downward pressure on ARPU has “moderated”.
Ad-Supported revenue of €126m (£108.7m) grew 24% year-on-year.
The introduction of Spotify Publishing Analytics allowed publishers to see when their songs are added to playlists and understand which playlists drive spikes in listening. Forty major publishers have engaged with the service so far.
Operating expenses of €420m (£362.5m) in Q1 increased 30% year-on-year. Operating losses totalled €47m (£40.6m). The loss was narrower than expected.
For Q2, Spotify is expecting 222-228m monthly active users (up 23-27% year-on-year), 107-110m premium subscribers (up 29-35% year-on-year) and revenue of €1.51-€1.71bn (up 18-35% year-on-year).
For the full year, Spotify anticipates 245-265m monthly active users (up 18-28%), 117-127 premium subscribers (up 21-32%) and total revenue of €6.35-€6.8bn (up 21-29%).