Spotify Expected to Report a Subscriber Slowdown — Is the Pandemic Boom Over?

Spotify subscriber slowdown
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Spotify subscriber slowdown
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Photo Credit: Haithem Ferdi

Spotify’s earnings report this week may reveal a dramatic subscriber growth slowdown.

The audio streaming company will report its first-quarter earnings to investors on Wednesday. But that report may include news of a significant subscriber slowdown compared to last year, according to rumblings from within the music industry and Wall Street.  That appears to be spurned by guidance from Spotify itself: the Guardian is now reporting that Spotify is telling investors “not to expect the boom to continue at such a pace” after reporting breakneck subscriber gains in 2020.

Most recently, Spotify reported 6 million new subscribers in the first three months of 2020. It reported 11 million new subscribers in its most recent quarter, ending December 2020.

Spotify added 31 million paying subscribers in 2020 — a significant boom during the pandemic.

The streaming company’s focus on new podcasting properties is likely to thank for that. Spotify now has over 155 million paying subscribers, bringing its total user base, including the ad-supported tier, to 345 million. But Spotify appears to have been priming investors for a subscriber growth slowdown since February.

The company’s latest forecast projects adding 29 million new subscribers this year at its best. At its worst, the forecast projected only 17 million new subscribers — nearly half the total of new subscribers from 2020. Despite reporting bullish subscriber gains back in February, Spotify’s stock price immediately fell 8% amidst revenue concerns.

Spotify has forecast an operating loss of $277.9 million to $416.9 million for 2021. That’s compared to an operating loss of $407.2 million in 2020.

The prospect of a Spotify subscriber slowdown isn’t a surprise given Netflix’s report last week. The video streaming giant reported a dramatic slowdown of subscribers in the first three months of 2021. Netflix only added four million new subscribers during that period, two million fewer than forecast. Netflix blamed the lack of subscriber growth on the lack of new content because of shutdowns.

Meanwhile, Spotify has spent nearly $1 billion diversifying its podcast portfolio – pulling the focus away from music. It has acquired massive podcast production companies to help pad its exclusive content to bring in new subscribers. Daniel Ek, Spotify’s founder, and CEO, says the strategy has worked as podcast listening has doubled on the platform.

But will the podcasting boom continue? Spotify has pulled drastic market share away from Apple Music, which started the podcasting trend over 16 years ago. But Apple isn’t giving up that ground so easily. Last week the Cupertino giant announced a redesign of its podcasting app and paid subscriptions.

Both Spotify and Apple will now allow podcast listeners to ‘subscribe’ to their favorite shows to support them monetarily. The terms of service between the two are drastically different, though – here’s an analysis between Apple Music and Spotify paid podcast subscriptions. They both benefit creators in different ways, though Spotify pays more – for now.