Netflix added over 5m paying subscribers per month in Q1 2020. Is this a promising sign for Spotify?

The theory that people on COVID-19 lockdown are turning to video streaming services for comfort and entertainment is… no longer just a theory.

Netflix announced last night (April 21) that its paying subscriber base worldwide reached 182.86 million at the end of March this year.

That was up by 15.77m on the 167.09m global subs the service counted in the prior quarter, at the close of December 2019 – representing an average net add of subscribers during Q1 of over 5m per month.

The 182.86m subs tally was up 22.8% year-on-year.

Far from getting out the party poppers, Netflix was muted in its response to this news, playing down the achievement as a pandemic-associated anomaly.

In a letter to shareholders, the film and TV company said: “Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth…. We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon.”

That’s as maybe, but in a global economy beset by Coronavirus-related gloom, Netflix’s subscription rise – and the accompanying 27.6% YoY growth in its quarterly revenues in Q1 (to $5.77bn) – is a rare ray of sunshine for the entire entertainment industry.

Eyes in the music industry now turn to another streaming service, of course: Spotify is due to announce its equivalent Q1 2020 results later this month, on April 29.

At the end of last year, Spotify counted 124m paying subscribers on its service, a number which was up by 11m on the prior quarter, an average monthly net add of 3.66m.

Could COVID-19 lockdown result in a bump in Spotify subscriptions just as it did for Netflix – even if it’s a lesser increase than the movie company’s?

At this point, for a music business facing a live industry wipeout, plus declines in physical sales and licensing income, any green arrows would be welcome.

A recent study of the activity of approximately 6 million credit cards in the United States suggested that cumulative music streaming subscriptions in the market were up by circa 20%, year-on-year, in the week ending April 1.

Worth noting: in Q1 last year, according to Spotify investor updates, its subscriber count grew by 32%.

Spotify’s Q4 numbers

Other data, however, suggests that streaming volume on Spotify (i.e. the total number of plays) has likely declined during Coronavirus quarantine, exacerbated by the postponement of some major releases.

Spotify’s revenue in it last quarter (the three months to end of December) weighed in at €1.86bn ($2.06bn), up 24% year-on-year.

Some €217m of this money (11.7%) came via Spotify’s advertising business, with the vast majority of its revenues (88.3%) generated by subscription.

The fact that Spotify’s ad-supported tier has long driven revenues worth around a tenth of its subscription business has, in the past, been a bone of contention for some elements of the record business.

Now, with media advertising income dropping like a stone during COVID-19 lockdown – but media subscriptions (touch wood) looking reasonably insulated thus far – artists, record companies, publishers and songwriters may just find themselves thankful for the way Spotify’s business model is weighted.

[Pictured: Recent hit Netflix series, Tiger King]Music Business Worldwide

Related Posts