Spotify Sees 'Amazing Opportunity' For In-Car Listening

While Spotify’s 2020 first-quarter report would have been mixed under normal circumstances, CEO/cofounder Daniel Ek and CFO Paul Vogel were downright enthusiastic at times during the company’s earnings call Wednesday morning, reflecting that the world’s biggest music-streaming service has been less impacted by the coronavirus pandemic and the ensuing lockdown than it might have been.

Variety reports the pair also discussed the opportunities that have been presented by changes in behavior during the lockdown, particularly the one presented by the drop in linear radio listening as people spend less time in cars.

Daniel Ek

Spotify added 6 million subscribers and its total revenue of $2.0 grew 22% year-over-year during the first quarter, roughly in line with its projections. And while ad revenue fell short of expectations “as a result of impacts from COVID-19, particularly the last three weeks of the quarter,” when it was 20% below projections, Ek was quick to note that advertising accounts for a “very small portion of our total revenue” — around 10%, he said. “Our business is less impacted than many others.”

The pair noted changes in listeners’ behavior during the lockdown: Obviously, the lockdown has seen exponentially more at-home listening as in-car usage dropped, with gaming platforms, televisions and home audio systems “exploding.”

Significantly, they noted the change in behavior has moved listeners away from linear radio, a trend they expect to accelerate, and one they see as creating the biggest opportunity for the company to convert listeners to on-demand streaming services.

Paul Vogel

Ek referenced the trend more than once when asked about other topics during the call. Asked whether the company plans to raise its subscription rates, he said, “Our primary strategy is growth rather than maximizing revenue, and that’s because we see this amazing opportunity of moving people from radio to on-demand audio.”

Asked whether the company’s decline in revenue late in 2019 meant that streaming’s growth could be reaching saturation, Ek noted an increase in growth rates in all territories thus far in 2020 as contradicting reports of a slowdown, and said the company sees an “amazing opportunity” in the millions of people who are no longer listening to linear radio in the car.

Another behavior change is a rise in catalog listening, due partially to the high number of releases that have been bumped until later in the year, including Lady Gaga, the Dixie Chicks, Alicia Keys and others.