Spotify Boosts Subscribers and Revenue

• Spotify shares fell 7% in extended trading Tuesday after reporting third-quarter earnings that narrowly beat analyst expectations on revenue.
• Spotify reported 456 million monthly active users for the quarter, up 20% from the year-earlier period.
• The company posted 195 million paid subscribers, up 13% year over year.
• Spotify criticizes Ye's comments, keeps his music

Spotify Technology posted a better-than-expected rise in revenue and users for the latest quarter as the audio streaming giant turns its focus to achieving profitability.

The Wall Street Journal reports Chief Executive Daniel Ek said in an interview Tuesday that subscribers can expect price hikes for the service sometime in 2023. The premium service in the U.S. has cost $9.99 since Spotify was launched in the U.S. in 2011. Spotify has implemented dozens of price increases in markets around the world without losing customers, said Mr. Ek.

Apple Inc. on Monday increased the subscription price in the U.S. for its music service by $1 a month, the first of any major company to break from the long-held $9.99 a month for individual users. The company cited an increase in licensing costs.

For its third quarter, Spotify reported 456 million monthly active users, up 20% from a year earlier and above the company’s guidance. Paying subscribers, Spotify’s most lucrative type of customer, climbed 13% to 195 million, also exceeding the company’s expectations, thanks to promotions and household plans.

During the quarter, Spotify introduced its expansion into audiobooks, the latest move in the company’s evolution from a pure-play music service to a more diversified audio business. Users can now purchase and listen to a catalog of more than 300,000 titles from independent authors and major publishers on a pay-per-download basis.

Ek said Apple’s App Store policies have hampered the rollout of its audiobook offerings, rejecting Spotify’s prompts to direct users to make purchases through a web browser instead of inside the app. The move means Apple won’t be taking up to a 30% commission for downloads. Spotify has been fighting Apple over its in-app purchase policies for years.

An Apple spokesperson said the Spotify app was rejected for not following the guidelines regarding explicit in-app communications to direct users outside the app to make digital purchases. “We provided them with clear guidance on how to resolve the issue, and approved their app after they made changes that brought it into compliance,” the spokesperson said.

Spotify said its results were affected by recent acquisitions including the audiobook company Findaway and the Wordle-inspired listening game Heardle.

Spotify posted a loss of €194 million, or 99 euro cents a share, compared with a loss of €80 million a year earlier. For years, executives have said the company will give priority to investment over profits as the company works to attract users around the world and expand into new forms of audio.

Subscriptions, the largest contributor to revenue, jumped 22% to €2.65 billion. Ad revenue climbed 19% to €385 million. Ad revenue, which has become a particular growth area for Spotify as it expands its podcast business, made up 13% of total revenue for the period. The company noted slower than forecast ad growth, citing the challenging macroeconomic environment.

Ek said recent anti-Semitic comments by the rapper Kanye West, who goes by Ye, were despicable, but said it wouldn’t remove the artist’s music from the service because it doesn’t violate the company’s policies.