Spotify has reported a 27% year-on-year growth in premium subscribers during Q3. The streaming giant now has 144m paying customers.
The increase in subscribers was at the top end of its guidance range. Growth was strong across all regions, with the added benefit of new launches including in Russia, which is the most successful new market launch to date.
Spotify said it also had a strong performance from the global rollout of the Duo subscription offer. The Google Nest mini promotion in the quarter exceeded forecasts in the UK and Canada.
Total monthly average users (MAUs) grew by 29% year-on-year to 320 million, which was above the top end of the guidance range. There was a strong performance in India and Russia.
“We are particularly encouraged by our MAU strength this quarter, as it supports the long-term health of our customer acquisition funnel and gives us confidence as we continue to expand into new markets,” said Spotify in a statement.
"The size of our total catalogue increased significantly, and our advertising business returned to growth," said CEO and co-founder Daniel Ek during the earnings call. "We also beat expectations in our newest markets where we are seeing growth continue to accelerate. This affirms our belief that there is significant pent up demand for Spotify around the world - even in places where our service has yet to launch.
"These results illustrate the power of our business despite Covid and other related challenges across the globe. As a result of our performance this quarter, we have updated our Q4 guidance ranges to reflect increased optimism on where we expect to end the year."
Covid-19 continued to impact Spotify, as the streaming giant suggested that summer demand was pulled forward in March and April during the lockdown period.
Global consumption hours surpassed pre-Covid levels during the quarter, and all regions have fully recovered. Consumption trends by platform have returned to normal useage, including in-car listening hours which are now above the pre-Covid peak. However, major territories including Germany and France and now re-introducing lockdown measures.
These results illustrate the power of our business despite Covid and other related challenges across the globe
Daniel Ek
Spotify said that useage on connected devices inside the home, which saw a spike during lockdown, remain above pre-Covid levels.
Total revenue of €1.975 billion (£1.79bn) grew 14% year-on-year in Q3 or 19% on a constant currency basis. Reported revenue was at the midpoint of the guidance range. Spotify made an operating loss of €224m (£202.6m).
Premium revenue grew 15% year-on-year to €1.79bn (£1.62bn), or 20% in constant currency terms, while ad-supported revenue rebounded, growing 9% year-on-year (or 15% in constant currency terms).
Within premium, average revenue per user (ARPU) of €4.19 in Q3 was down 10% year-on-year (or down 6% in constant currency terms). Product mix accounted for the majority of the ARPU decline, followed by geographic mix. In October, Spotify raised the price of the Family Plan in seven markets (Australia, Belgium, Switzerland, Bolivia, Peru, Ecuador, and Colombia) alongside Duo in Colombia.
Daniel Ek addressed the price increases during the earnings call.
"While our primary focus remains user growth, based on our maturity in certain markets and the increasing value we provide to our subscribers - including enhanced content - we’ve seen engagement and more specifically value per hour grow substantially over the past few years," he said. "I believe an increase in value per hour is the most reliable signal we have in determining when we are able to use price as a lever to grow our business.
"And while it is still early, initial results indicate that in markets where we’ve tested increased prices, our users believe that Spotify remains an exceptional value and they have shown a willingness to pay more for our service. So as a result, you will see us further expand price increases, especially in places where we’re well-positioned against the competition and our value per hour is high. I would, however, throw in one big caveat, we will continue to tread carefully in these Covid times to ensure we don’t get ahead of the market."
Ad-Supported revenue of €185m (£167.3m) outperformed the forecast, exhibiting a return to growth following the impact of the global pandemic in Q2.
As of Q3, Spotify had 1.9m podcasts on the platform (up from more than 1.5 million podcasts in Q2). During Q3, 22% of total MAUs engaged with podcast content (up from 21% of MAUs in Q2 2020).
Spotify’s guidance for Q4 is for 150-154m premium subscribers and 340-345m MAUs.
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