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Spotify Q3 2018 Earnings Metrics on Track But Investors Not Convinced

Report by Mark Mulligan
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The 20,000 Foot View: Spotify’s XXX 2018 earnings once again showed continued solid progress across most of its performance metrics, with strong progress in many areas. However, weakening investor confidence across US tech stocks as a whole, coupled perhaps unrealistic investor expectations saw Spotify’s share price fall again.

Key Findings

  • Spotify reported XXX million subscribers in XXX 2018, up XXX on XXX 2017, which is in line with MIDiA’s XXX million forecast made at the start of 2018
  • Inactive subscribers were up by one million to reach five million – the first increase since XXX 2017
  • Ad supported monthly active users (MAUs) returned to growth in XXX 2018, adding five million users – the same increase that was registered one year previously 
  • A pattern of seasonal cyclicity is emerging for Spotify’s ad supported business
  • Subscriber growth was largely the same across all regions, but ad supported grew strongly in Latin America – up XXX margin in XXX 2018 fell slightly from the previous quarter to reach XXX reflecting the recurring six monthly cycle of promotional campaigns 
  • Premium revenue grew by XXX during XXX 2018 to reach XXX billion, a faster rate than the XXX by which subscribers increased during the same period, with a gross margin of XXX supported was still just XXX of total revenue in XXX adding just XXX million of revenue, compared to XXX million for premium revenue
  • Spotify ARPU was down in XXX 2018 across three key measures: premium, rights holder and gross profit
  • Churning out users from XXX promotional trials drove ARPU down in XXX subscriber churn was down to XXX the second successive quarter of decline, down XXX each quarter year-on-year
  • Factoring in churn, Spotify added nine million subscribers in total, which means that it lost five million, one more than it retained
  • Delivering good, steady growth is good enough for the music industry, but not good enough for investors

Companies and brands mentioned in this report: Spotify

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