Spotify Hits 100 Million Paid Subscribers

Daniel Ek  -  Code Conference - Publicity-H 2018
Asa Mathat for Vox Media

The music streaming service now has 217 million active monthly users as it looks to grow its advertising and video revenue.

Music streaming giant Spotify on Monday reported a smaller fiscal first-quarter loss and said it grew its user base to 100 million premium subscribers and 217 million total active monthly users.

Premium users were up from 96 million in the fourth quarter and 75 million in the year-ago period, while active monthly users were up from 207 million in the fourth quarter and 173 million in the year-ago period. Spotify had predicted the former to reach 97 million to 100 million and the latter to hit 215 million to 220 million in the latest quarter.

The premium user gain was "driven by a better-than-plan promotion in the U.S. and Canada and continued strong growth in Family Plan," Spotify said. "We also saw strong growth from the expansion of our Google Home Mini promotion, as well as the price reduction to our Spotify Premium+Hulu offering in the U.S."

The company, led by CEO Daniel Ek, said its loss for the first quarter came in at $158 million (142 million euros), compared with a year-ago loss of $189 million (169 million euros). The company said on an operating basis its loss was better than expected as "a result of higher gross profit and lower-than-expected marketing spend." Revenue rose 33 percent to nearly $1.7 billion (1.5 billion euros), while operating expenses increased 30 percent.

Asked on an analyst call Monday morning about upcoming competition from Amazon, which is set to offer its own music streaming platform in partnership with music rights holders, Ek said he wasn't worried about the e-commerce giant competing against Spotify, Apple Music and others in the audio space.

"Competition is not a big factor of us. It's really all about growth," Ek said, as he argued Spotify would continue to grow as music consumption worldwide expands. "The music industry market is way bigger than most people realize. There's a billion customers in the world that are consuming music. We are all trying to get the music industry into streaming, and that's a cyclical trend that will keep going for at least another five or ten years," he told analysts.

Ek and Barry McCarthy, Spotify CFO, also addressed the company's big bet on podcast markets after buying producers Gimlet Media and Parcast, and distributor Anchor, to better compete against leading podcast distributor Apple.

The execs insisted growth in the storytelling space will come from Spotify giving podcast producers tools to help share their work and be discovered by users. "We see a tremendous reaction from the community of podcasters as we've recently rolled out tools where for the first time podcasters are getting actionable insights into who's listening to their content," Ek explained.

Spotify will also help podcasters sell ads inside of their content, rather than have to create their own sales force. And McCarthy argued that, while Apple remains the biggest podcast distributor, it has no advertising business or ability to tailor ads to individual podcasts using data insights.

"We're working hard on building ad insertion technology and we will use that technology to dramatically revolutionize the ad experience on podcasts for listeners," he added.

In its latest results, Spotify also highlighted its push into India to expand its global market footprint to 79 countries. "More than 1 million users signed up for Spotify in our first week in the market, and growth has continued to outpace our expectations. We now have more than 2 million users in India."

Spotify forecast that its monthly active user count would hit 245 million to 265 million for the full year 2019, with its total premium user base to reach 117 million to 127 million.

Spotify in March filed an anti-competition complaint against Apple with the European Commission (EC), the regulatory body of the European Union. "In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience — essentially acting as both a player and referee to deliberately disadvantage other app developers," Ek said back then.

"I do think this is the moment where the issues needs to be debated and there's a willingness to engage with these questions," Ek told analysts on Monday about the complaint against Apple filed with the EC.

When Spotify lodged its complaint, Apple responded by saying that the music streaming giant "wraps its financial motivations in misleading rhetoric" and wants to "keep all the benefits of the App Store ecosystem, including the substantial revenue that they draw from the App Store’s customers, without making any contributions to that marketplace."

April 29, 6 a.m. Updated with comments by Spotify execs about their latest financial results during an analyst call.