Mikey Campbell
Streaming leader Spotify on Wednesday issued its first earnings report after going public in February, noting a sequential increase in paying subscribers and revenue of $1.36 billion. The performance missed Wall Street expectations.
Spotify finished the quarter ending in March with a new high of 75 million subscribers, an increase of 45 percent from the same time last year, the company said. Those premium members are folded into the 170 million active users the service recorded over the same period, a figure up 30 percent year-over-year.
For the quarter, Spotify recorded year-over-year revenue growth of 26 percent, in line with its own estimates, but short of Wall Street predictions. The firm's stock price tanked in after-hours trading, down to as low as $153.50, or nearly 10 percent at the time of writing.
In April, industry competitor Apple Music reached a milestone 40 million subscribers, up from 27 million recorded last June.
While Spotify's subscriber base is nearly double that of Apple Music, Apple is gaining paying users at a rapid rate of 5 percent per month. As noted by The Wall Street Journal, Apple Music's trajectory will put the service ahead of Spotify in the U.S. sometime this summer.
Whether domestic growth will translate into international gains remains to be seen, but users are showing continued interest in Apple's product with some 8 million potential customers currently signed up for a three-month trial.
Apple executives touted Apple Music's growth during an earnings conference call for the second quarter of 2018, with CEO Tim Cook saying the product helped push services revenue to a new high of $9.1 billion. CFO Luca Maestri added the most recent March quarter saw Apple Music reach a new record for both revenue and paid subscribers.
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16 Comments
Not all subscribers are equal and that's why Spotify's revenue is disappointing and will probably continue to be. A large percentage of their subscribers are taking advantage of $1 a month trials (which they might not renew) or are bundled subscribers who get discounts (or free premium service) as part of their cell phone service or are Starbucks employees with free "paid" services, etc. All of Apple's paid subscribers are paying full rates (or family plans) after a three month trial. It would be interesting to know how many of Spotify's "premium paid subscribers" are actually paying anything close to the base $9.99 a month. Probably not so many. Spotify still works primarily as a free service, despite it's efforts to claim otherwise. It's going to be slowly eaten up by Apple and then the curtain will be pulled back to reveal most of it's premium service customers were created with smoke and mirrors.
The usual suspects are always touting Spotify's superior subscriber numbers as proof it is eating Apple Music's lunch. We are treated to a constant barrage of comments from Spotify disciples extolling the virtues of the service and its superiority over Apple Music. In reality it's the same old argument people make about market share being the metric that determines who will prosper and who will die. How many times has Apple been doomed to extinction because Samsung sells more phones? Then comes the head scratching reports about Apple taking in the majority of industry profits. Get a clue. Spotify has serious business model and revenue issues to deal with.
These analysts are so stupid. They think subscriber growth is so important for streaming services. If a company doesn't have a profitable financial model with a small subscriber base, it doesn't matter how many more subscribers they get. Spotify has never been profitable. They're carrying a free subscription tier that's like a boat anchor to their profitability. There's always this belief on Wall Street that as long as a company has huge market share percentage, it's a great investment. Just a couple of days ago there was some analyst claiming that Spotify was a gold mine and the share price was going to rocket to the stars. Get in now, he said. Typical Wall Street pumping. It's just disgusting how analysts are always trying to deceive investors. I like Spotify and I'm not hoping for it to fail. I just don't like the idea of analysts pumping up a company with a poor business model. It costs unwary investors too much of a loss.
I think Spotify could be an Enron in the making.
Relatively small company with HUGE number of paying subscribers can't make money?
It just does not add up.
Mikey,
Here we go again. Bad math and why do you link the numbers to another article that is wrong.
Please explain how 5% growth catches up to Spotify by the summer. It doesn't. They are also growing and have a bigger lead.
thanks