Reports Music

Spotify Q4 2018 Earnings Strong Subscriber Growth With a Hint of Profitability but Long-Term ARPU Deflation

Report by Mark Mulligan
Cover image for Spotify Q4 2018 Earnings
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The 20,000 Foot View:  Spotify finished 2018 strongly, over performing in both subscriber and ad-supported MAU additions. This was accompanied by Spotify’s first ever profitable quarter and two major podcast acquisitions early in 2019, hinting at a positive year ahead. However, at the same time, premium ARPU continues a long-term decline. This is the price Spotify is paying for maintaining global subscriber market share.

Key Findings

  • Spotify hit            subscribers, up            from            million in           
  • Spotify added            net new subscribers in            2018,            same as in            2017
  • Ad-supported users            strongly, adding            million, which was            more than the            million added            previous year
  • Europe is            a majority premium region for            with            of European MAUs in            paying a subscription 
  • Year-on-year, North            share of global subscribers decreased                       in            2017 to            in            2018
  • Annual European            was largest with            million registered                       2018 – this was            higher                       2017, compared to a            increase            Latin America
  • Globally,            2018            to Spotify improving conversion rates            all markets, and potentially becoming            majority premium business at some            in 2019 or 2020
  • Premium revenue            Europe grew by            in 2018                       million net new revenue) compared                       annual growth in 2017            million            new revenue)
  • Ad-supported revenue            by            in 2018 (adding            million            new revenue) compared to                       million            new revenue) in 2017
  • Premium revenue            new momentum, while ad-supported revenue            to start delivering  
  • Following a            of            in            2018, Spotify brought            churn rates down to            in            and then            in            2018
  • The cumulative            of churn throughout the year            an annual churn rate of            from            in 2017 
  • Spotify added            gross new subscribers in 2018            to            million in 2017
  • Premium ARPU            from            in 2016 to            in            a fall of           
  • Over the            period, ad-supported ARPU followed a            opposite trend, growing            from            to           
  • Spotify slightly            its global subscriber market share                       in 2018, up from            in            but is having to discount            aggressively to do so
  • Spotify’s average            revenue per user (AARPU) grew            just            in 2018, but investments            ad tech and infrastructure will            see accelerated growth in 2019
  • Podcasts are            next big play, and will            see Spotify commissioning top-quality radio            from right under the noses            radio companies

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