×

Spotify Zooms to 124 Million Premium Subscribers in Q4, Record Quarterly Gain Driven by Promos

Spotify reported its best-ever net adds for Premium subscribers and topped guidance for total monthly active users for the fourth quarter of 2019, as the audio-streamer said it plans to double down on podcasting in 2020.

Total monthly active users worldwide were 271 million as of the end of the year, up 31% and beating the high end of its previous guidance. The streaming music and audio service reported 124 million Premium subscribers globally, up 29% year-over-year — its highest quarterly net adds, up about 11 million from Q3.

The gains in Premium subscribers came at a cost: Spotify’s average revenue per user for the Premium business dropped 5% in Q4, to $5.12 (€4.65), largely because of the company’s the extension of free trial periods across its entire product suite. The aggressive promos show that Spotify is still in land-grab mode in trying to gain share in the competitive music-streaming market against the likes of Apple, Amazon, and Google and YouTube.

Separately, Spotify announced a deal to acquire The Ringer, the sports and culture digital-media company founded by Bill Simmons, as part of bulking up its podcast portfolio.

Spotify’s total Q4 revenue of $2.04 billion (€1.855 billion), up 24%, was in line with Wall Street expectations. The company said revenue in its Premium segment was slightly better than forecast, while ad-supported revenue came in slightly weaker.

However, Spotify remains unprofitable: It posted a net loss of $230 million (€209 million) for Q4, with costs associated with stock-based compensation weighing on the bottom line. And the company told investors that the red ink will continue in 2020 as it continues to build on its long-term podcast strategy. Spotify shares declined more than 3% in pre-market trading on the outlook.

“Any decision to accelerate our investment in podcast and technology spend should be viewed as an indication of our belief that our strategy is having tangible results,” Spotify said in its Q4 letter to investors. “We have gained even more confidence in the data, particularly around the benefits from podcasts, and as a result, 2020 will be an investment year.”

According to Spotify, more than 16% of total MAUs now listen to podcasts, and “early data indicates that these users are more likely to convert to Premium over time.” In the fourth quarter, podcast listening hours jumped almost 200%. The company says it has more than 700,000 podcast titles available on the platform.

Spotify’s operating expenses in Q4 soared 80%, to $607 million (€551 million), which the company said was largely driven by higher than expected “social charges,” payroll taxes associated with stock-based compensation, due to the increase in its stock price.

For the first quarter of 2020, Spotify forecast total MAUs of 279 million-289 million and Premium subscribers to be between 126 million-131 million. For full-year 2020, the company’s guidance is for MAUs of 328 million-348 million and Premium subscribers of 143 million-153 million.

Spotify said it expects free cash flow to be negative in Q1, as several music-licensing payments were shifted into the quarter, but anticipates delivering positive free cash flow for the full year.

The Q4 subscriber growth was “bolstered by our promotional activity,” according to Spotify. That included an expansion of its three-months-free offer to new Family Plan subscribers, in addition to previous offers for individual and student plans. Spotify also benefited from the ongoing Google Home partnership, under which new and existing Premium subscribers in the U.S. can claim a free Google Home Mini — a pact that has driven a “meaningful amount of incremental subscribers,” the company said.

The company also credited its fifth annual year-end Spotify Wrapped campaign with driving usage in Q4, expanding the campaign to 21 markets globally. More than 60 million users engaged with Wrapped content this year, who shared more than 40 million Wrapped stories and cards and listened to more than 6.5 billion streams from top-songs playlists.

While ad-supported revenue rose 23% in Q4, that was short of expectations because of a “slower start than usual” in the quarter following “technical issues we had implementing a new order management system last quarter,” Spotify said in the shareholder letter. In Q4, Spotify rolled out Dynamic Ad Breaks in the U.S. and U.K., adding “significant sellable inventory,” and the company expects to expand the capability into 10 more markets in Q1.

More Digital

  • YouTube TV

    YouTube TV Is Dropping Fox Regional Sports Nets, YES Network After Sinclair Standoff

    YouTube TV, Google’s internet pay-TV service, said it will drop the Fox regional sports networks and the YES Network from customer lineups this Saturday, Feb. 29 — citing an impasse in negotiations with Sinclair Broadcast Group, which owns the RSNs. “We purchase rights from Sinclair to distribute content to you,” the YouTube TV account said [...]

  • Facebook F8 Conference 2019 - Mark

    Facebook Cancels F8 Developers Conference Over Coronavirus Fears

    The worldwide coronavirus pandemic has prompted Facebook to cancel this year’s F8 developers conference. The F8 2020 was scheduled for May 5-6 at the McEnery Convention Center in San Jose, Calif. The social giant had held the conference every year since 2007, and last year’s F8 drew more than 5,000 attendees, according to the company. [...]

  • Rachel Whitney Joins Spotify as Nashville

    Rachel Whitney Joins Spotify as Nashville Head of Editorial

    Rachel Whitney, formerly of YouTube, is joining Spotify as the Head of Editorial for Nashville, she announced in a social media post (which recently has become a method of the streaming giant announcing new employees).  A source close to the situation points out that the company now has two female executives at the helm of [...]

  • RM, V, Suga, Jin, Jimin, Jungkook,

    BTS' New Video for 'ON' Breaks YouTube Premiere Record (Watch)

    BTS have dropped their second official music video from their new album, “Map of the Soul: 7,” for the song “ON” — and within minutes of it dropping, the song became the biggest YouTube Premiere of all time, with 1.54 million concurrent viewers tuned in for the clip’s debut on YouTube Premieres. According to the [...]

  • Lisa Holme

    Discovery Hires Hulu's Lisa Holme to Lead Streaming Strategy

    Lisa Holme, a Hulu veteran who had been leading its international expansion strategy, has joined Discovery in a newly created role to oversee content and commercial strategy for the company’s direct-to-consumer streaming group. Discovery named Holme to the newly created role of group senior VP, content and commercial strategy, in Discovery’s direct-to-consumer group. She is [...]

  • Peloton

    Peloton Settles Legal Fight With Music Publishers

    Peloton settled a lawsuit filed by members of the U.S.’s music-publishing trade organization that had sought more than $300 million in damages over the interactive-fitness company’s alleged use of 2,468 unlicensed songs. The National Music Publishers’ Association (NMPA), which represents American music publishers and songwriters, and Peloton together announced that they have “fully settled” the [...]

More From Our Brands

Access exclusive content