Reports Music

Spotify Q2 2018 Earnings More Needed from Emerging Markets and Ad Supported

Report by Mark Mulligan
Cover image for Spotify Q2 2018 Earnings
Synopsis PDF Excel PowerPoint

The 20,000 Foot View: Spotify’s XXX 2018 earnings show continued solid progress across most of its performance metrics. However, investor scrutiny is intensifying, especially with the growing subscriber arms race in the US becoming — albeit incorrectly — perceived as a litmus test for global success. Spotify’s earnings reflect a need to drive faster growth in emerging markets and ad supported, which helps explain the company’s extra emphasis on its artists’ direct business efforts, even though this puts Spotify at direct odds with its rights holder partners. The tightrope act continues.

Key Findings

  • Spotify hit XXX million subscribers, up XXX from XXX million in XXX 2017, which is in line with MIDiA’s XXX million forecast made at the start of 2018
  • Ad supported users, on a restated basis, declined by one million compared to XXX XXX are having slightly less impact with subscriber net adds at eight million, one million less than the net adds in the previous promotional trial XXX 2018 saw no reported change in the distribution of Spotify’s users, either paid or subscribers
  • Rest of World, a priority region, is not growing fast enough – just XXX million net subscriber added, highlighting the importance of the Indian licensing impasse
  • Spotify needs to start delivering on its Rest of World promise, especially to shift investor attention away from the US subscriber arms race it is unlikely to win
  • Total revenue in XXX 2018 was XXX million, up XXX on the previous quarter and XXX year-on-year, which was a slower yearly growth rate than in XXX XXX supported revenue is not growing fast enough, falling to XXX of all revenue in XXX XXX compared to XXX in XXX XXX though ad supported margins and APRU improved
  • Premium ARPU was up to XXX in XXX XXX from XXX in XXX XXX but still below XXX XXX levels and XXX down from one year previously
  • Rights holder income per subscriber was up slightly to XXX from XXX in XXX XXX but still significantly below the XXX XXX level of XXX subscriber adds were XXX million in XXX XXX meaning it lost a net total of four million subscribers in the quarter

Companies and brands mentioned in this report: Amazon, Amazon Music Unlimited, Apple, Apple Music, Spotify

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