Daniel Ek says Spotify’s subscription growth is increasing. But that’s not true in monetary terms.

“Streaming subscription slowdown? What streaming subscription slowdown?”

They weren’t exactly Daniel Ek’s words today on Spotify’s Q1 2020 earnings call, but they’re not far off.

Ek was asked by analyst Richard Kramer of Arete Research how Spotify could be sure that its subscription base isn’t now reaching saturation in key developed markets (including the US, UK and much of Europe).

Kramer said he’d seen evidence in the IFPI’s 2019 numbers that industry-wide global streaming subscription growth slowed last year versus 2018. (The IFPI is officially yet to release its 2019 annual book, but we’re guessing Kramer and Co. got a sneak peek.)

“As I outlined in my opening remarks, we’re actually seeing an increased growth rate relative to Q1 2019,” said Ek. “We’ve accelerated our rate of growth in all of our territories, including North America and Europe.”

He added: “That does not indicate a sign of a slowdown – we’re very encouraged.”

As you’d expect for a man running a public company, Ek wasn’t telling fibs: The number of Spotify Premium subscribers worldwide grew by 30m in Q1 2020 vs. Q1 2019 (up from 100m to 130m).

That was a bigger jump than the growth in Premium SPOT subs seen in Q1 2019 vs. Q1 2018, which increased by a margin of 25m (from 75m to 100m).

These numbers effectively extinguished industry fears over how the COVID-19 pandemic might have potentially hurt Spotify’s subscription growth in the first three months of this year.

Back-slaps all round in Record Label Land, right?

Not quite. Because Spotify’s impressive subscription growth came at a serious cost… literally.


Spotify’s ARPU – the average revenue paid each month by its Premium subscribers around the world – fell by 7% at constant currency, year-on-year, to €4.42m in Q1 2020.

Want a quick takeaway factoid as to why that’s so significant?

It’s the first time in history that Spotify’s official ARPU has fallen to less than half the €9.99-per-month subs price it launched with, in Europe, in 2008.

Still not convinced this is worthy of industry alarm bells?

Try this: Yes, Spotify’s year-on-year Premium subscriber growth, as correctly pointed out by Daniel Ek, increased in Q1 2020 vs. Q1 2019.

But its year-on-year Premium subscriber revenue growth did not.

Actually, it slowed down… because of ARPU. Because Spotify’s 130m Premium customers were paying, on average, 7% less money than they were at the same time last year.


As you can see below, in Q1 2019, SPOT posted €1.385bn in Premium revenues – representing year-on-year growth of €348m.

In Q1 2020, however, it posted €1.700bn in Premium revenues – up by the smaller amount of €315m.

So, whether or not Spotify’s Premium subscription business hit a ‘slowdown’ in Q1 is really a matter of perspective.

It depends if you’re counting heads, or if you’re counting money.



Getting a handle on just how far Spotify’s ARPU has dropped in recent years makes this picture complete.

In the F-1 prospectus Spotify filed with the SEC in 2018 ahead of its public flotation, the company revealed its global ARPU rates for Q4 (the three months ending December) in 2015, 2016 and 2017.

You can see them below, in Euros, also converted into USD at the average monthly rates in these quarters according to OFX data.



In US dollar terms, the yearly amount that the average Spotify subscriber pays for their Premium account, globally, has fallen by $34.32 – more than a third – since December 2015.

Spotify blamed “a significant portion” of its 7% ARPU tumble in Q1 2020 on “the continuation of longer free trials rolling over from Q4 and additional intake during Q1”.

But really, that’s just the company saying, “We’re just gave more Premium access away for free, for longer – and then decided not to stop.”

“In US dollar terms, the yearly amount that the average Spotify subscriber pays for their Premium account, globally, has  fallen by $34.32 – or more than a third – since December 2015.”

SPOT also noted that, excluding free promo trials, its ARPU would still have declined by 4% year-on-year due to “shifts in product and geography”.

Interestingly, Spotify appears to have become rather more blasé about ARPU declines than it was in Q1 2019, when it was reassuring investors/industry partners that “downward pressure on ARPU has been moderated”.

(Also interesting: Perhaps the most outspoken critic of Spotify’s tumbling ARPU in recent years has been Warner Music Group CEO Steve Cooper. Warner recently inked a new global deal with Spotify, which Ek said today is a “a multiyear deal that covers all existing markets and new markets as well”.)


One way to curb declines in ARPU, of course, would be for Spotify to finally raise its standard Premium prices – as it did in Norway two years ago, where SPOT’s Premium cost remains 10% higher than it once was.

Ek was asked today if Spotify might be considering a change in Spotify’s pricing in the “upcoming months and years”.

He quickly – in the main – swatted the suggestion away.

“We have made small pricing experiments in some of our more mature markets and obviously due to inflation you’ve seen us adjust pricing in some [other] territories too. The response from those have been very positive, but it’s not something that we’re focusing on in the short term.”

Daniel Ek, speaking today (April 29)

“No, again, our primary strategy is growth,” said Ek. “As we said before, rather than maximizing revenue [we are focused on] this amazing opportunity of moving [people] from radio to on-demand audio; that’s the trend line that we’re trying to capture and that’s what you’re seeing us go after.”

Added Ek: “We have made small pricing experiments in some of our more mature markets and obviously due to inflation you’ve seen us adjust pricing in some [other] territories too. The response from those have been very positive, but it’s not something that we’re focusing on in the short term.

“[However], it’s definitely encouraging to see that we have that opportunity for when the economy improves, and we feel that’s the right trade off to make.”

Music Business Worldwide

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