Spotify has reported a 31% year-on-year increase in premium subscribers to 130 million in the first quarter of 2020.
The figure was up from the 124m reported in Q4 2019, while total monthly active users (MAUs) also grew 31% YOY to 286m in the three-month period ending March 31, 2020 – the third consecutive quarter of YOY growth above 30%. Gross margin finished as 25.5%.
In a letter to shareholders, the streaming service, which launched the Covid-19 Music Relief Project last month, said results had either met or exceeded expectations in all major metrics despite the pandemic, with the exception of ad-supported revenues of €148m, which were lower than forecast.
"Our business remains very healthy with more than €1.8 billion in liquidity and we expect to be free cash flow positive for the year," it said. "Overall, despite some changes in listening patterns, we are encouraged with the trends we are seeing, and continue to be optimistic about the underlying growth fundamentals of the business."
During the earnings call, Spotify CEO and co-founder Daniel Ek said he hoped the success of new releases of The Weeknd and Dua Lipa would encourage other artists to release new music in the current climate.
"The Weeknd's album, After Hours, had the biggest debut of the year so far and Dua Lipa's album, Future Nostalgia, broke three Spotify records when it was released in late March," said Ek. "Fans are craving new music and we expect to see more artists and labels move forward with their planned releases.
"We've definitely seen more consumption of catalogue music," he added. "Part of that, though, has been due to the fact that we haven't seen the same amount of new music releases in this quarter. I would suspect that will shift as more new releases come into play Q2 and onwards."
The past few months have strengthened the company's belief in its Freemium model, he added.
"We have seen an increase in lapsed users coming back to the service," said Ek. "One can specualte I guess that those might have been with competing services, but in light of the economic crisis are now coming back through due to our Freemium offering, but we don't have any concrete evidence that's the case."
On changes in listener habits during lockdown, the service has noted that morning routines have changed significantly.
"Time at home has moved people out of their cars, requiring them to shift their listening behaviours, and that's when they discover streaming," said Ek. "While listening in the car has declined, listening on video consoles is exploding, and we continue to see increased listening on home speakers and through TVs."
The company is maintaining its targets for 2020 in terms of total MAUs (328-348m) and premium subscribers (143-153m), but has reduced its revenue projections to €7.65-€8.05 billion from €8.08-€8.48 billion as a result of changes in foreign exchange rates and advertising expectations related to Covid-19.
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