Spotify has reported a 29% year-on-year increase in its premium subscribers for Q4 2019.
The streaming giant – Music Week’s current cover stars – now has 124 million premium subscribers globally, a result ahead of forecasts. It was the highest net add quarter for Spotify, and the fastest that it’s added 10 million subscribers.
Total monthly active users (MAU) grew 31% year-on-year to 271 million, also outperforming the high end of the company's forecasts.
In its Q4 financial results for the period ending December 31, 2019, Spotify noted that growth in MAUs accelerated for the third consecutive quarter.
The company also reported “exponential growth in podcast hours streamed”, with an increase of around 200% year-on-year. As Spotify UK head of studios James Cator noted in Music Week’s cover feature, podcasting is driving increased overall engagement and retention on the platform.
During the earnings call, CEO and co-founder Daniel Ek commented on the huge growth of podcast listening.
"That's a global phenomenon, it's not just a US phenomenon," he said. "Because of that [user] engagement, they are all listening to more music. It's a really very healthy user trend."
“We have seen early indications that our investments in podcasts are having a positive impact on conversion of free to paid users,” said Spotify in its note to investors. “Overall, the business performance remains strong, and we believe we are well positioned for growth in the coming year.”
The company today announced it has reached a deal to acquire The Ringer, a US sports, entertainment and pop culture website and podcast network.
In terms of MAUs, growth re-accelerated across the three largest regions – Europe, North America, and Latin America – while the Rest of World segment is the fastest growing. North America saw the fastest quarterly growth since Q4 2018.
Spotify’s expectation is that the free funnel will translate into continued strong subscriber growth.
The quarter included Spotify’s popular Wrapped promotional activity. More than 60 million users engaged with Wrapped, contributing to more than 6.5 billion streams from year and decade Top Songs playlists.
As well as its Google Home deal in the US, Spotify launched partnerships with Curry’s PC World in the UK and Microsoft’s gaming subscription XBox Game Pass in the US and UK. There was also a renewal of an agreement with one of France’s largest telco operators, Bouygues. Each deal features a six-month free trial to Spotify Premium.
We have seen early indications that our investments in podcasts are having a positive impact on conversion of free to paid users
Total Q4 revenue of €1.855 billion (£1.57bn) represented a 24% year-on-year increase. For the full year, revenue was up 28.6% to €6.764bn (£5.71bn).
Premium revenue was €1.638bn (£1.38bn), up 24% year-on-year; ad-Supported revenue was €217m (£183.1m), up 23% year-on-year.
Operating loss was €77m (£65m) for the quarter and €73m (£61.6m) for the year – up from the €43m (£36.3m) operating loss in full year 2018. Annual net loss in 2019 was €186m (£157.1m), compared to €78m (£65.9m) in 2018.
For the premium business, average revenue per user (ARPU) of €4.65 (£3.92) in Q4 was down 5% year-on-year (down 6% excluding the impact from currency fluctuation). The decline was put down to the uptake of free trials and geographic expansion.
"The most important thing for us is growing users and growing subscribers," said CFO Paul Vogel.
Ad-Supported revenue growth of 23% was an acceleration from Q3, but slightly below the forecast
Premium gross margin was 26.9% in Q4, up from 26.5% in Q3, but down 0.4 percentage points on the prior year’s quarter.
For Q1 2020, Spotify is forecasting MAUs of 279-289m and premium subscribers of 126-131m.
For the full year, the forecast is 328-348m MAUs and 143-153m total premium subscribers.
The streaming giant is also forecasting total 2020 revenue of €8.08-€8.48bn (£6.82-7.16bn).