Spotify subscriber count grew by 8m in Q2 – but advertising revenues fell 21% year-on-year

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Spotify has just published its financial results for Q2 2020, revealing that the streaming platform counted 138m Premium subscribers globally at the close of the quarter (ended June 30).

That was up by 8m subscribers on the 130m SPOT counted at the end of the prior quarter (Q1 2020), and up by 30m (+27%) year-on-year.

As a result of this growth, Spotify’s Premium revenue hit €1.758bn in Q2, up by €58m (+3%) on the €1.70bn the firm generated from subscriptions in the prior quarter, and up €256m on the equivalent figure from the same quarter in 2019.

Meanwhile, Spotify’s total global Monthly Active User (MAU) count at the end of Q2 reached 299m, up 67m year-on-year, and up by 13m on the 286m reached in the previous quarter.

There was less positive news in terms of digital advertising revenues – a sector that has been hit hard across the board during the COVID-19 pandemic.

SPOT’s ad-supported revenues in Q2 2020 (€131m) fell 21% YoY, as well as declining by €17m (-11%) on the €148m posted in Q1 2020.

Those results meant that advertising revenues contributed just 6.9% of Spotify’s total revenues (€1.889bn) in Q2 2020, with Premium revenue making up 93.1%.

Spotify blamed the pandemic for these falls in a letter to shareholders, stating: “Last quarter we noted a marked deceleration in [ad] sales brought on by the global health crisis where the last three weeks in March were down more than 20% relative to our forecast. Performance continued to lag our expectations through April and May, but we significantly outperformed expectations in the month of June.”

Spotify’s premium monthly ARPU (Average Revenue Per User) in Q2 2020 was down 9% year-on-year (or 7% at constant currency) to €4.41 – a number, as ever, that will get record labels talking.

Spotify said: “Product mix was the dominant driver accounting for most of this [ARPU] decline.”

SPOT posted a €167m quarterly operating loss in Q2, but this figure fell to €356m in terms of net loss – largely due to €294m in finance costs.

Spotify’s guidance in the prior quarter suggested that the company would hit between 133m and 138m subscribers in Q2. At 138m, SPOT hit the top end of that prediction.

The company also forecast that its MAU figure would be between 289m and 299m at the end of Q2, and again it hit the upper estimate.

Spotify’s prior guidance further suggested that its total revenues would reach between €1.75bn and €1.95bn in Q2 2020, which it achieved with €1.89bn.

Summing up its performance in terms of Monthly Active Users in Q2, Spotify told investors today: “Growth in North America exceeded our expectations, accelerating more than 200 bps this quarter relative to growth in Q2 last year. We saw retention continue to improve in Q2. This is on top of the gains we saw in North America throughout 2019. India also outperformed our forecast this quarter thanks to strong performance from marketing campaigns in the region. Latin America and Rest of World continue to see the fastest growth, with those regions growing 33% and 58% Y/Y, respectively.

“Early in the quarter, we observed some COVID related softness in several countries across our emerging regions. Parts of Latin America and Rest of World saw slower than expected growth in April and May as we saw lower intake, an increase in churn, and increases in payment failures from our Premium users. Encouragingly, things rebounded significantly in June as we saw increased reactivations and a step down in churn. While we finished below forecast in aggregate across these regions, our strength in North America and other areas more than offset the slow start to the quarter. Additionally, we believe the improved momentum we saw in the back half of the quarter has continued into Q3 and we expect to hit our full year targets.”Music Business Worldwide

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