Losses Deepen For Spotify Despite Subscriber, Podcast Growth

Spotify reported on Wednesday morning it added 8 million new paying customers during the second quarter, topping analyst estimates, but at the same time fell short of Wall Street’s Q2 revenue expectations, reports Yahoo! Entertainment.

Paying active users hit 138 million overall by the end of June, Spotify reported, coming in higher than the 136-137 million paying customers analysts had anticipated the Stockholm-based company would report. Spotify’s premium subscribers increased 27% from the same time a year ago. For comparison, Spotify’s chief rival, Apple Music, reported it had 60 million paying customers in June 2019, the last time it shared an update. Monthly active users increased 31% year-over-year to 299 million.

Spotify failed to top analyst projections for sales, however, with the company reporting revenue of €1.89 billion, or about $2.22 billion, compared to expectations of €1.92 billion in Q2 revenue. Sales increased 13% year-over-year, although ad revenue of €131 million was down 20% from the same time last year. Spotify, after posting a small profit during Q1, saw its net loss surge to €356 million, or €1.91 per share; analysts had projected a loss of €0.35.

The greater-than-expected loss was attributed to social charges, which includes payroll taxes, benefits and stock compensation, per Spotify’s report.

After warning the service had seen a “modest” drop in consumption due to the coronavirus pandemic at the end of the first quarter, Spotify on Wednesday, in its letter to shareholders, said “global consumption hours have recovered to pre-COVID levels.”

“Our business performed well in Q2 and continues to operate at a high level despite the continuing uncertainty surrounding the Covid-19 pandemic,” Spotify added in its letter to shareholders. “Excluding the impact of social charges related to the increase in our share price during Q2, all of our key metrics would have finished at or ahead of our expectations. Our liquidity position and free cash flow remain strong, and we are encouraged with the underlying trends of the business.”

According to engadget.com, Spotify documents also reveal how far people have gone back to living their normal lives after some of the COVID-19 lockdowns were relaxed. According to the streaming company, it’s seen “in-car listening” stats rebound to just 10 percent less than what it was before lockdowns began.

And the pandemic hasn’t exactly hurt the company’s quest to be the first to break the coveted 300 million user mark. Spotify revealed that its total user base has grown to 299 million, with business still booming as people get back to work and businesses start buying ads again. Of that figure, 138 million are paying for Premium, with the remainder using the ad-supported version of the platform.

Spotify’s interest in podcasts is paying off, too, with 21 percent of its users now listening to podcasts on the platform. That number “continues to grow at triple digit rates year over year,” and so we’re expecting that figure to continue to rise across the year. Not to mention that this surge in podcast listening is before the company’s controversial exclusivity deal with Joe Rogan kicks in this September.