Spotify Misses Quarterly User Target Amid Decline in Ad-Supported Account Additions

Spotify subscriber slowdown
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Spotify subscriber slowdown
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Photo Credit: Haithem Ferdi

Spotify added nine million monthly active users (MAUs) – including seven million premium subscribers and just two million ad-supported accounts – during Q2 2021, and as a result, total MAUs at June’s end, 365 million, were beneath “guidance range and forecast.”

The Stockholm-based company revealed these and other noteworthy stats in its newly released Q2 2021 performance breakdown. Covering April, May, and June of 2021, the document discloses at the outset that Spotify MAUs increased from 356 million to 365 million on the quarter, against an increase of 11 million in Q1 2021. Nevertheless, the newest figure reflects a three percent quarter-over-quarter improvement and a 22 percent year-over-year boost.

For reference, the audio-entertainment service had relayed in the Q1 2021 analysis that it expected MAUs to total between 366 million and 373 million at the end of the second quarter, including 162-166 million premium subscribers. Notwithstanding the miss on the MAUs front, however, premium accounts, at 165 million at Q2 2021’s conclusion, touched the upper end of the range.

Explaining the lower-than-anticipated addition to MAUs, higher-ups cited “lighter user intake during the first half of the quarter” and emphasized that “COVID-19 continued to weigh on our performance in several markets, and, in some instances, we paused marketing campaigns due to the severity of the pandemic.”

The most significant usership takeaway from the earnings report concerns ad-supported listeners, who spurred the MAU miss by recording an increase of just two million, to 210 million, across the quarter, compared to a gain of nine million in Q1.

Nevertheless, revenue from ad-supported accounts hiked from €216 million (about $255 million at the present exchange rate) to €275 million ($324.69 million), a QoQ gain of 28 percent and a 110 percent boost from Q2 2020, which was impacted heavily by the pandemic. The improvement “was led by our Direct and Podcast sales channels,” Spotify execs wrote.

Premium revenue, for its part, continued to account for the lion’s share of Spotify earnings, at €2.056 billion ($2.43 billion) – up 17 percent YoY and six percent QoQ.

Interestingly, the regional breakdown for both MAUs and premium subscribers – which typically fluctuates by at least a few percentage points – remained exactly the same between Q1 and Q2, with 34 percent of MAUs located in Europe, 24 percent in North America, 22 percent in Latin America, and 20 percent in Rest of World. 40 percent of premium subscribers continue to reside in Europe, to 29 percent in North America, 20 percent in Latin America, and 11 percent in Rest of World.

Regarding podcasts – in which Spotify has invested heavily, including inking a multimillion-dollar deal for Alex Cooper’s Call Her Daddy last month – on-platform programs increased from 2.6 million in Q1 to 2.9 million.

Significantly, “the percentage of MAUs that engaged with podcast content on our platform improved modestly relative to Q1,” with the total having remained flat at 25 percent between Q4 2020 and Q1 2021. This continually slow engagement growth, in coordination with an ever-expanding podcast library, could be indicative of far-reaching difficulties associated with converting music fans into podcast listeners (or engagers, more specifically) and consumers of other non-audio entertainment.

In terms of additional efforts to overcome licensed music’s razor-thin margins and achieve profitability, Spotify likewise provided an update on its controversial two-sided marketplace programs, including Discovery Mode and Sponsored Recommendations.

“Thus far, artists with tracks in Discovery Mode have found over 40% more listeners on average compared to pre-Discovery Mode,” higher-ups wrote. “Additionally, 44% of those listeners had never listened to the artist before.”

“A broader rollout of Discovery Mode” is slated for “later this year,” while Sponsored Recommendations “continued to gain traction during the second quarter” amid an international expansion and the arrival of “new functionality for artist teams using the self-serve platform to target specific audience segments… a functionality previously only available to customers purchasing through our sales team.”

Lastly, Spotify’s Q2 2021 operating expenses finished at €651 million ($769 million), and the company employed 7,085 full-time team members globally at the halfway point of 2021. The release likewise mentions the debut of social-audio platform Spotify Greenroom, Facebook’s rollout of the Spotify “miniplayer,” and the many “major promotional partnerships” Spotify is using in an effort to grow its subscriber base.

Among the latter are free three- or four-month Spotify Premium trials for TikTok users, as well as similar promotions involving Samsung, Microsoft, Epic Games’ Fortnite, PayPal, and Vivo. For 2021’s third quarter, Spotify has forecasted 377 to 382 million MAUs, 170 to 174 million premium subscribers, and revenue of €2.31 billion ($2.73 billion) to €2.51 billion ($2.97 billion).

Plus, notwithstanding the MAU gain of only nine million in Q2 2021, execs anticipate that MAUs will crack 400 million in Q4 2021 – 35 million more than the present total and, at the upper end of the forecast (407 million MAUs), a hike of 42 million. At the time of this piece’s writing, Spotify stock (NYSE: SPOT) was down about seven percent from yesterday’s close, for a per-share price of $220.01.

One Response

  1. Nikky

    Most of the time, I listen to Spotify Free songs online. But during the 3-month free trial of Spotify Premium, I have downloaded some favorite Spotify songs with the help of Tunelf Spotibeat Music Converter. So Sometimes, I will enjoy them for offline streaming.