Spotify’s Premium subscriber base grew by 10m in Q2 to reach 220m paying users

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Spotify‘s been making headlines globally over the past 24 hours for its decision to finally raise its subscription prices in over 50 markets, including the US.

On Monday (July 24), MBW explored how much this round of price increases could be worth to the company – and to the music industry.

More news from the streaming giant arrives today (July 25), as Spotify announces its financial results and user numbers for the second quarter of 2023 (ended June 30).

First, the headline stats: Spotify’s global Premium Subscriber base grew to 220 million paying users in the quarter (ended June 30).

That was up 17% year-on-year, and up by 5%, or 10 million subscribers, on the 210m that SPOT counted at the end of the prior quarter (Q1 2023).

The company’s total global Monthly Active Users (MAUs), meanwhile, grew 27% year-on-year to 551 million in Q2 2023 and by 7% compared to the previous quarter (Q1 2023) when the platform counted 515 million MAUs.

Spotify said in its investor presentation “that all regions outperformed and saw higher MAU net additions relative to the prior year period, aided by improved retention and marketing efficiencies”.

The company also notes that its MAU net additions of 36 million were above guidance and an all-time high for the company.

This performance, according to SPOT, was driven by “continued improvements in Ad-Supported retention and performance marketing efficiencies” as well as “shifts in competitor dynamics in select developing markets”.

The company also notes that it saw “strong growth amongst Gen Z listeners”.

SPOT’s Premium subscriber net additions of 10 million were 3 million ahead of guidance. The company says that its Premium subscriber performance in Q2 was driven by a promotional campaign “contributing to subscriber upside”, and “outperformance across all regions, led by Europe and Latin America”.

Spotify’s Ad-Supported MAUs grew by 26 million – from 317 million in the prior quarter (Q1 2023) to 343 million in Q2.

In terms of finances, Spotify’s Premium subscriber growth translated into Premium revenue of €2.773 billion ($3.01bn, as per the average quarterly exchange rate published by the European Central Bank) in Q2, which was up 14% YoY at constant currency.

The firm’s ARPU (Average monthly Revenue per Subscriber) landed at €4.27, down 3% YoY constant currency.

Meanwhile, Spotify’s ad-supported revenue hit €404 million ($439.83m) in Q2, up 15% YoY at constant currency (see below).

The company’s total revenue (including Premium and ad-supported) reached €3.177 billion ($3.458bn) in Q2, up 14% YoY at constant currency.

The company’s Gross Margin finished at 24.1% in Q2, while, in terms of profitability, Spotify posted an operating loss of €247 million.

SPOT states in its investor presentation that its reported Gross Margin and Operating Loss “were both primarily impacted by charges related to our actions to streamline operations and reduce costs”. (Around 200 employees were laid off from the company’s podcast division during the quarter.)

Spotify also notes that its Operating Loss of €247 million in Q2 was impacted by €135 million in net charges. “These charges include the aforementioned impact to Gross Margin and an additional €91 million related primarily to our real estate optimization plan and severance,” the company said.

Excluding these items, SPOT’s Adjusted Gross Margin of 25.5% (which excludes €44 million in net charges) was in-line with guidance and its Adjusted Operating Loss of €112 million was better than guidance (see below).

In terms of guidance for Q3, Spotify forecasts reaching 572 million MAUs, an addition of around 21 million net new MAUs in the quarter.

The company projects its total Premium Subscriber base to hit 224 million in Q3, an addition of approximately 4 million net new subscribers in the quarter

“Overall, we are encouraged by the strength we saw in Q2 and our momentum heading into the back half of 2023,” said SPOT in in its investor filing on Tuesday.

All EUR-USD conversions made at the average rate of the relevant period according to the European Central Bank.Music Business Worldwide