Spotify Technology SA on Wednesday reported a 29% rise in premium subscribers in the fourth quarter, as the music streaming company rolled out promotions to battle competition from Apple and Amazon.com.
Premium subscribers, which account for nearly 90% of the company's revenue, stood at 124 million for the three months ended Dec. 31, up 29% Y/Y and ahead of forecast. This was the highest net add quarter Spotify has ever experienced, and the fastest the company has ever added 10 million subscribers.
The company also forecast first-quarter premium subscriber numbers largely in line with estimates. It expects total premium subscribers in the range of 126 million to 131 million for the first quarter.
"While we believe these trends will continue moving forward, we have been appropriately conservative regarding our 2020 guidance as our data, particularly around the benefits from podcasts, is still reasonably new," Spotify said.
Spotify expects total revenue in the range of 1.71 billion euros to 1.91 billion euros for the first quarter.
Q1 2020 Guidance:
- Total MAUs: 279-289 million
- Total Premium Subscribers: 126-131 million
- Total Revenue: €1.71-€1.91 billion
- Gross Margin: 23.5-25.5%
- Operating Profit/Loss: €(65)-€(115) million
Full Year 2020 Guidance:
- Total MAUs: 328-348 million
- Total Premium Subscribers: 143-153 million
- Total Revenue: €8.08-€8.48 billion
- Gross Margin: 23.2-25.2%
- Operating Profit/Loss: €(150)-€(250) million
Spotify is leading the music streaming market and has a lead over its two closest rivals - Apple Music had more than 60 million subscribers as of June and Amazon had over 55 million subscribers globally.
For the third consecutive quarter, Spotify's total Monthly Active Users (MAU) growth accelerated while Subscribers, Revenue, and Gross Margin all met or exceeded expectations. The company continues to see exponential growth in podcast hours streamed (up approximately 200% Y/Y) and is seeing clear indications that podcast usage is driving increased overall engagement and retention.
Spotify's results in Q4 were bolstered by the company's promotional activity. On December 5, 2019, Spotify launched the 5th annual year-end Spotify Wrapped campaign. The campaign ran through the end of the month and was enhanced in several key ways this year. Importantly, Spotify delivered the consumer experience via the native mobile app (in addition to a website hosted on Spotify.com) for the first time, expanded the reach of the campaign to 21 markets globally, highlighted insights from the past decade (in addition to the year), and provided a personalized Wrapped experience to all Spotify creators (inclusive of podcasters). More than 60 million users engaged with Wrapped content this year, spurring more than 40 million shares of Wrapped stories and cards and more than 6.5 billion streams from Year/Decade Top Songs playlists.
The company's Q4 revenue rose to 1.86 billion euros ($2.05 billion) from $1.50 billion euros a year earlier.
Acquisition of Bill Simmons’ The Ringer to Grow Sports Vertical
Spotify has also entered into a definitive agreement to acquire The Ringer, a creator of sports, entertainment and pop culture content. The Ringer was founded by Bill Simmons in 2016. Terms of the transaction were not disclosed.
The Ringer will bring to Spotify its sports and entertainment team, podcast catalog and website, further expanding Spotify’s content offering and audience reach. With its popular show lineup, The Ringer also offers new opportunities for monetization along with a continued focus on deepening audience engagement and formats within Spotify’s business model.
The transaction is expected to close in Q1 2020 and subject to customary closing conditions.