Deezer lowers revenue forecast for FY 2023, with no net global subscribers added in latest quarter

In April, Paris-headquartered streaming service Deezer told its investors that it expected “double-digit revenue growth, in excess of 10%” for the full year of 2023 vs. 2022. That’s no longer the case.

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In a trading update today (August 2), Deezer has lowered its official forecast for FY 2023 to 7-to-10% YoY revenue growth, as a consequence of what it called “a more gradual build-up of Partnerships and new Verticals”.

Accompanying that change in forecast today are Deezer’s half-year results, covering the six months to end of June 2023.

In that six-month period, says the company, it generated EUR €233.2 million in overall revenue, up 6.5% YoY at constant currency.

Most of that revenue was generated in Deezer’s home nation of France – €142 million, a figure that was up 7.2% YoY.

Outside of France, Deezer saw a 5.3% YoY growth in revenues (at constant currency) in the half-year period to €91.3 million.

The firm’s total global subscriber base at the close of Q2 stood at 9.3 million – down 100k from the 9.4 million subscribers it counted at the end of June last year.

Deezer’s latest global subscriber figure means it failed to add any net global subscribers in Q2: The firm’s total global subscriber base at the close of Q1 2023, as announced in April, was also 9.3 million.

Deezer organizes its subscriber base into two categories:

• ‘Direct’ (i.e. people who’ve subscribed direct to the platform without signing up to a third-party bundle)
• ‘Partnerships’ (i.e. people who’ve subscribed via a bundle deal with a third-party partner like telco Orange).

Deezer’s ‘Direct’ subscribers in France grew to 3.6 million as of end of June 2023, up 300k from the same period a year prior.

Its ‘Direct’ subscribers outside of France, however, fell by the same margin (-300k YoY) in the same period, down to 2.0 million.

Deezer’s ‘Partnerships’ subscribers (globally) fell by 100k YoY to 3.7 million.

Deezer said that, on a gross profit basis, it achieved break-even in France in the first half of 2023, as well as seeing a “significant improvement” in its gross margin in the rest of the world.

The firm’s adjusted H1 adjusted gross profit (+14.2% YoY to €51.8 million) improved, as did its half-year adjusted EBITDA loss, which weighed in at -€13.1 million in H1 2023 vs. -€24.6 million in H1 2022.

Deezer partly pinned its improved gross profit on “the positive impact of the optimization of [Deezer’s] freemium service in long tail countries, offset in part by higher publishing rates”.

The firm further said it will now “continue to prioritize profitability while targeting revenue growth from Partnerships and Direct subscriptions in selected key markets”, and that it “remains on a path to generate a positive cash flow3 in 2024 and achieve a positive adjusted EBITDA in 2025, while delivering double-digit average yearly revenue growth over the 2023 to 2025 period”.

Commenting on today’s results, Jeronimo Folgueira, CEO of Deezer, said: “Our H1 results confirm that our strategy is bearing fruit, and that we are able to drive significant operational performance improvements. We continue to grow and have cut our losses by almost half compared to last year.

“Additionally, the recent signatures and launches of large, new partnerships will help us accelerate growth in the years to come. Our direct subscription and freemium businesses show stronger economics, and we continue to optimize our market position and strictly control our costs. All of this makes me very confident that we are on the right path to achieve our profitability and cash generation objectives.”

Deezer finished June 2023 with €90.9 million in cash/cash equivalents on its balance sheet, and net cash position of €66.4 million – which it said was” in line with resources required for [our] 2025 plan”.

“Our H1 results confirm that our strategy is bearing fruit, and that we are able to drive significant operational performance improvements. We continue to grow and have cut our losses by almost half compared to last year.”

Jeronimo Folgueira, Deezer

In March, Deezer announced an experimental new relationship with Universal Music Group that will see the two companies look to develop new royalty-payout models for music streaming.

Last month, Deezer renewed its long-running partnership with telco Orange in France.

Since 2010, Orange customers in France have benefited from access to Deezer’s music streaming platform.Music Business Worldwide