Bad news for Spotify
Spotify added 25 million paying customers to its premium service in the second quarter of this year. In most industries that would be regarded as an excellent result. But when Spotify announced its actual earnings earlier this week, its share price dropped 5 per cent.
The reason for this is simple. And brutal.
Spotify’s analysts projected that it would reach up to 110 million subscribers. But it only delivered 108 million.
The revenue that comes from its premium subscribers makes up 90 per cent of the company’s overall
income, and it didn’t hit its projected target.
‘‘We missed on subs. That’s on us,’’ said Spotify chief executive Daniel Ek.
The music streaming app remains way ahead of its competitors, though. Apple Music, for example, has 60 million fewer subscribers despite its aggressive promotions and built-in software for the iPhone, iPad and Mac.
Speaking about the numbers, Ek said the company would ‘‘make up lost ground before year end’’.
‘‘A key metric that illustrates the health of our business is user engagement and this quarter, our users listened to more than 17 billion hours of content on the platform, up 35 per cent yearover-year.
‘‘All of our key metrics finished within or at the high end of our forecast, except for quarterending subs.
‘‘Our goal is to land at roughly the 78th percentile of our guidance, and we missed on subs. That’s on us. The good news is the shortfall was execution-related rather than softness in the business.’’
Spotify is projecting between 120 million and 125 million premium subscribers by the end of the year, bringing in a total revenue of NZ$1.74-$3.2 billion (with a gross margin of 23.7-25.7 per cent).
The news comes in the shadow of Netflix’s announcement last week. It admitted that it lost subscribers for the first time since 2011 and was also walloped on the stock market, losing 10 per cent of its price.