During Q1, Spotify's paid subscriber total grew to 158 million, up 21% from the same period a year ago, as the streaming giant's battle with Apple Music and Apple Podcasts heats up.
While Spotify welcomes the subscriber growth, it cautioned about uncertain expansion moving forward. Some of its newest growth markets — most notably India — are experiencing surges in COVID-19 cases, casting an uncertain light on future returns.
Average revenue per user dropped 7% year-over-year to 4.12 euro, or around $4.98. The company attributes the decrease to lower prices in new markets and discounted plans designed to attract new subscribers.
Spotify's total subscription revenue rose 14% to 1.93 billion euro, the equivalent of $2.33 billion. Global consumption hours also grew year-over-over. Per-user consumption grew in developed regions. Meanwhile, developing regions "showed signs of improvement but remained below pre-COVID levels."
Although Apple Music is the second most popular music streaming service after Spotify, the iPhone maker hasn't released subscriber totals since 2019 when it passed 60 million paid users. Based on the previous growth rate, Apple Music likely passed 70 million subscribers months ago, but the company has kept those numbers to itself.
Spotify sees advertising as a key growth area, particularly in podcasts. It now has 2.6 million available podcasts, an 18% increase over the previous quarter. Podcast consumption also grew, along with overall content consumption.
Earlier this month, Apple boosted its podcasting efforts with the Apple Podcasters Program. The initiative allows podcast creators to charge listeners for exclusive content like ad-free listening, exclusive content, and early or exclusive access to new series.
"With Apple making its move into subscription, there is this platform war emerging," Josh Lindgren, head of Creative Artists Agency's podcast department, told The Wall Street Journal.
Spotify countered with a paid subscription platform using its podcast creation tool Anchor. The move allows creators to post links to Anchor payments outside of the Spotify iOS app.
This method appears to exploit an App Store loophole, bypassing Apple's 30% cut of App Store transactions without breaking any rules. It remains to be seen whether Apple will counter or attempt to block Spotify's loophole workaround.
Perhaps to help offset uncertain growth in emerging markets, Spotify has continued to raise its family plan prices. After increasing family bundle costs across several markets in late 2020, the streaming service announced a price increase in the U.S. from $14.99 to $15.99 starting this week.
Apple Music family bundles still cost $14.99.
Apple's music service is also part of Apple One bundles. Individual Apple Music plans are included in the $14.99 Apple One bundle. Apple Music family plans are also part of the company's $19.95 and $29.95 Apple One plans, which add various other services.
Hi-Fi on the horizon
Spotify has also announced plans to offer a Spotify HiFi streaming plan sometime later in 2021. The new tier will include lossless streaming, bringing higher-bitrate, CD-quality tracks to the most popular streaming platform.
Spotify hasn't yet announced pricing or committed to a specific release date — beyond "later this year" — for its Hi-Fi subscription plan.
Although premium audio has a vocal and enthusiastic audience, it isn't clear whether the upcoming service will attract new users or otherwise boost Spotify's fortunes in any notable way. A 2016 study showed that most users can tell the difference between compressed and lossless audio, but they sometimes need "training" to know how to discern between the two.
HiFi audio typically requires expensive equipment for users to notice much of a difference. AirPods won't likely reveal much of a difference for most users, but it may be more evident with the premium AirPods Max.
Currently, Spotify streams in the Ogg Vorbis format at 320kbps. Apple Music encodes tracks in AAC at 256kbps.
Apple hasn't announced any plans to bring a similar CD-quality option to Apple Music.
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