Spotify has posted Q2 results that show continued growth in subscribers and monthly users.
In line with Spotify’s long-term strategy for its post-IPO expansion, there was no sign of profitability in Q2. The operating loss was €90 million (£79.98m), an increase on the €79m (£70.2m) loss a year earlier.
Total Revenue was €1.273 billion (£1.13bn), up 26% year-on-year (34% on constant currency basis).
We’ll have to keep an eye on the share price, but Spotify will hope to keep investors happy with its user numbers – and hold off Apple Music in key markets. It finished the quarter with 180m monthly active users (up 30% year-on-year) and 83m premium subscribers (up 40%), similar to growth in the previous quarter. It has added 8m premium subscribers in three months.
“Family Plan continues to be a primary driver of gross adds and lower churn due to strong retention,” said its financial statement.
During an earnings call, CEO Daniel Ek played down reports of its direct licensing ambitions.
"We've always licensed music from rightsholders large and small," he said. "Licensing content does not make us a label nor do we have any intention of becoming a label."
But the company is building its Spotify For Artists programme (it's hit 200,000 we learned today) and Ek has spoken of his hopes of helping a million artists live off their art. Playlist opportunities have also been opened up to new artists.
"The goal of the marketplace is to create tools for all types of artists and labels," Ek added.
We expect our leadership to continue going forward
Daniel Ek
The Q2 figures coincided with various reports about Spotify's progress, which were knocked back by the executives. CFO Barry McCarthy said claims of increased churn and gains by Apple Music was "not what happened".
"We've also seen improvements in the US," he said. "We are encouraged by the business overall as a global business and the US in particular."
Ek was less forthcoming about the stalling of Spotify's India launch, which he blamed largely on local licensing negotiations rather than any major label concerns over direct licensing.
By the end of Q4, Spotify is forecasting premium subscribers of 93-97m as the global streaming market continues to grow.
"We are the largest global platform and we expect our leadership to continue going forward," said Ek.
Premium revenue was €1.15bn (£1.02bn) in Q2 (up 27%, or 35% on a constant currency basis), while ad-supported revenue hit €123m (£109.3m), an increase of 20%.
Questioned about Spotify's bundling with Hulu TV in the US, Ek said there may be more such deals. "You should look at it as part of our strategy for more ways to add more value to our members," he explained.
Following its major revamp of the free service, ad-supported monthly average users totalled 101 million, an increase of 23% year-on-year.
Average revenue per user was €4.89 (£4.34) in Q2, down 12% year-on-year.
The company has also revised up previous monthly user figures after it had removed a proportion employing ad blockers. It estimates users employing ad-blockers on the free service are under 5%. Fake users manipulating stream counts are also being removed in a “timely fashion”.
Spotify said growth in emerging regions of Latin America and ‘Rest of World’ outpaced growth in more established markets.
Gross Margin of 25.8% was at the high end the company’s guidance range.
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