Spotify Hits High End of Q3 Subscriber Forecast, CFO Barry McCarthy to Exit

Spotify kept packing on millions of listeners and subscribers for the third quarter of 2019, with the company claiming it’s growing twice as fast as chief rival Apple.

The company also announced that CFO Barry McCarthy will retire from Spotify on Jan. 15, 2020, to be replaced by Paul Vogel, who is currently Spotify’s VP of financial planning and analysis, treasury and investor relations. McCarthy is to be reappointed to the Spotify board, a role he held prior to joining the company as CFO.

McCarthy, who is a former CFO of Netflix, led Spotify through its public debut in March 2018 through its unusual direct listing on the Nasdaq.

For Q3, Spotify’s total monthly active users grew 30%, to 248 million, and paid subscribers were up 31%, to 113 million at the end of the period. Net subscriber growth “exceeded our expectations and was led by strong performance in both Family Plan and Student Plan” tiers, the company said in its earnings letter.

Spotify reported total revenue of $1.92 billion (€1.73 billion), in line with Wall Street expectations, which was up 28% year over year. The company posted earnings per diluted share of 36 cents, thanks to $240 million (€216 million) net new finance income recorded during the quarter (which represents a benefit for the fair-market value decline of Spotify stock options held by founders Daniel Ek and Martin Lorentzon).

Spotify shares climbed 10% in early trading Monday on the results.

Relative to Apple, “the publicly available data shows that we are adding roughly twice as many subscribers per month as they are,” Spotify said in the letter. Additionally, the company said it believes Spotify’s monthly engagement is roughly twice as high and our churn is at half the rate of Apple Music. “Elsewhere, our estimates imply that we continue to add more users on an absolute basis than Amazon,” Spotify said.

Spotify said its ad-supported business grew revenue 20% year-over-year to about $189 million (€170 million) — under its expectations. About 80% of the miss was related to “self-inflicted implementation and integration issues” Spotify experienced with the rollout of a new0order management software to replace Google’s Doubleclick Sales Manager, which was phase out in July. That resulted in a combination of lost orders and under delivery of other orders totaling about €9 million of “lost” revenue.

For Q4 2019, Spotify forecast total MAUs of 255 million-270 million; Premium subscribers to be 120 million-125 million; revenue to be $1.93 billion- $2.15 billion (€1.74 billion-€1.94 billion) and operating loss between $34 million-$145 million (€31 million and €131 million).

Spotify plans to ramp up its efforts to sell services to music artists and their partners, in addition to monetizing its user base through ads and subscription fees. The company said it will provide investors more detail on the expected upside to 2020 earnings from the “Two-Sided Marketplace” strategy with its fourth-quarter earnings report. “These initiatives drive both revenue growth and content cost savings,” Spotify said. Among its efforts on this front: Last week, it launched sponsored full-screen recommendations for indie artists to pay to promote new releases.

The company touted momentum for its podcast push, though it still remains a small piece of the business. About 14% of Spotify’s monthly users listen to podcasts, with the number of podcast hours streamed in Q3 up 39% sequentially — although the company admitted that’s off a small base. The majority of podcast listenership occurs in the U.S. but Spotify said usage is growing faster in several European countries. “Podcast engagement is clearly a growing global phenomenon,” the company told investors.

Spotify now offers more than 500,000 podcast titles, launching 22 original or exclusive titles in Q3 including Gimlet’s “The Clearing” and Parcast Studios’ “Natural Disasters,” “Medical Mysteries” and “Summer of ‘69.”

Also in the investor letter, Spotify noted that its stock currently is trading around 33% lower than Wall Street 12-month price targets when it went public in March 2018. Meanwhile, the company’s full-year 2019 guidance is above projections on all metrics. “Sometimes the stock price reflects the performance of the business and sometimes it doesn’t. But eventually, it always does,” the company said.

More Digital

  • Adobe Premiere Pro_Productions

    Adobe Premiere Pro to Add Project Management, Multi-User Collaboration Tools

    Adobe Premiere Pro is about to get better at working on big projects — and letting multiple users collaborate on the same video production. The vendor is adding a new set of tools called “Productions” to its Premiere Pro video editing software. Those will provide features for managing projects and sharing assets among them, along [...]

  • Amazon Italy

    Amazon Moving Into Italian Originals With Multigenre Slate (EXCLUSIVE)

    Amazon is moving into Italian originals with a multigenre slate comprising “Bang Bang Baby,” a Milan-set mob drama with a young woman at its center, a comedy series centered around popular local star Carlo Verdone, and an unscripted food travelogue titled “Dinner Club.”  The streamer’s first forays into Italian scripted content were announced Thursday at [...]

  • 100 Thieves

    Esports Organization 100 Thieves Unveils New Facility in Los Angeles

    As of Wednesday, popular esports organization 100 Thieves has an official home in Los Angeles. The group unveiled its new 15,000 square-foot facility, officially named the 100 Thieves Cash App Compound, in a media preview with some of its biggest personalities and investor Scooter Braun on hand. Also in attendance was Jack Dorsey, the CEO [...]

  • Amazon Music

    Amazon Music Tops 55 Million Users, Still Playing Catch-Up to Spotify and Apple

    Amazon is famously reluctant to release specific numbers about its users, so it’s notable that the e-retailing giant announced that it has surpassed 55 million customers worldwide for Amazon Music. The company didn’t reveal how many of those users are on its various pricing tiers, but said subscriptions to Amazon Music Unlimited grew by more [...]

  • The Crown Season 3 Oliva Colman

    Record Intl. Growth Sees Netflix Beat Q4 Earnings Forecast

    Fast growth in international markets, contrasting with only sluggish subscriber gains in North America, was a major factor behind streaming giant Netflix’s better than forecast growth in the last quarter of 2019. The company is set on keeping up that international momentum. Globally Netflix added 8.76 million new customers in the three months to December [...]

  • TikTok - LA lobby

    TikTok Opens New L.A. Office in Culver City

    TikTok, in a signal of the short-form video app’s growing clout and entertainment ambitions, announced the company’s Los Angeles operations have moved into a new 120,000-square-foot office in Culver City, Calif. TikTok’s new office space occupies five floors at the C3 campus at 5800 Bristol Parkway in Culver City. According to the company, the space [...]

  • SiriusXM president and CCO Scott Greenstein

    SiriusXM's Scott Greenstein Named Music Visionary of the Year by UJA-Federation

    SiriusXM president and chief content officer Scott Greenstein will be honored by the UJA-Federation of New York as its Music Visionary of the Year on June 4 in New York City. The award recognizes exceptional professional accomplishments and commitment to philanthropy. Previous recipients have included Sony Music Group CEO Rob Stringer, Republic Records co-founders Avery [...]

More From Our Brands

Access exclusive content