Digital Gabe
Cutting Edge Commentary On All Things Media

Spotify Q1 Earnings Roundup

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Yesterday’s Spotify earnings call was a mixed bag for investors.  Audience numbers were up – the streamer announced they hit the 100M subscriber milestone (with 26M subs in North America), and now have 217 worldwide MAUs.  Despite this growth Spotify’s business economics are still in a challenging spot.  They reported an operating loss of $158M compared to a $187M loss in Q1’18.  Spotify also announced their plan to spend another $500M on podcast acquisitions in 2019, so investors should expect the red ink to keep flowing.

One growing concern for Spotify is their ARPU (Avg Revenue Per User), which dropped 2% to $5.25 per month.  This is a result of Spotify having to offer more aggressive subscription trials as they attempt to fend off Apple Music.  While Spotify’s ad revenue is up 24% YoY, ad sales represents under 10% of their total top line rev.  So there’s not enough scale on ad-supported side of the business model to make up for future ARPU declines.  This issue is worth keeping an eye on.

On the positive side, Spotify is seeing growth in emerging markets.  For instance, Spotify has gained 2M subs since launching in India just 60 days ago.  So it feels like they’re running towards daylight in markets where (not coincidentally) Apple isn’t as strong.

The Street’s reaction to yesterday’s earnings call was also mixed.  The stock closed down a hair, but that’s probably a win given Spotify’s ongoing macro challenges.

 

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