Spotify Stock (SPOT) Plunges on Disappointing Subscriber Growth Forecasts — And a Very Uncertain Q1

Spotify stock (SPOT) sinks in after-hours trading, February 2nd.

Spotify stock (SPOT) sinks in after-hours trading, February 2nd.

Spotify’s slowing subscriber growth isn’t just a music industry problem. Now, Wall Street is seeing a plateau ahead — and punishing Spotify’s stock accordingly.

Spotify stock (SPOT) took another drubbing in after-hours trading on Wednesday evening (February 2nd) as Wall Street expressed disappointment with the latest premium subscriber report. The streaming giant divulged its latest quarterly financials as the markets closed, revealing a respectable 8 million premium subscriber gain worldwide during the fourth quarter of 2021. But the broader picture and forecast proved problematic.

SPOT shares immediately entered a post-market tailspin. Within 10 minutes of the market’s final bell, shares tanked nearly 22% before recovering some ground. But future trading sessions are likely to be choppy — to say the least.

Spotify now counts an impressive 180 million premium subscribers across the globe, which was unthinkable just a few years ago.

Spotify indicated that its latest haul of 8 million new subscribers (accomplished in just three months) was at the upper range of its guidance. Total users topped 406 million, also at the upper-end of its guidance, with revenue jumping 24 percent over the year-ago quarter to 2.7 billion ($3.05 billion).

That beat analyst expectations of $2.99 billion for the quarter. Revenue from Spotify’s premium subscriptions was up 22% to $2.59 billion, versus the analyst expectation of $2.57 billion. Spotify improved its loss-per-share from —€0.66 last year to just —€0.21 per share this year.

Not helping matters was a 7 million ($7.91 million) operating loss.

Since December, Spotify stock has been getting pummeled as markets shifted out of non-profitable tech companies and shakier bets. On that front, Spotify has flirted with profitability in previous quarters, but its shaky financial picture put the company on the wrong side of 2022’s correction.

Spotify counted ‘just’ 155 million premium subscribers at the end of 2020.  That’s a decent 16.1 percent increase, though a sizable chunk of those gains came from developing nations and emerging markets. While more developed (and higher-priced) countries are leveling off, the bigger problem is what lies ahead.

On that front, the streaming platform project a gain of just 3 million premium subscribers during the current quarter.

That was surprisingly low, and could indicate a range of problems. Given that the projection was issued on February 2nd, nearly halfway through the current quarter, the lower figure could suggest problems with defecting subscribers.

Spotify is forecasting monthly active users of 418 million, short of analyst expectations of 422 million. Spotify’s forecast for its premium subscription growth has also dropped from an expected 185.3 million to just 183 million. Revenues are forecast in line with expectations at around $2.93 billion.

Enter Joe Rogan, whose controversial podcast has sparked a high-profile exit from catalog giants Neil Young and Joni Mitchell.

Whether that is sparking a snowball effect is uncertain, though late today, the venerable cast of Crosby, Stills & Nash declared their desire to ditch Spotify. Just one problem: the legendary trio doesn’t own the rights to their music and can’t unilaterally make that decision.

But the removal is still likely if labels and IP owners agree. As of late Wednesday (February 2nd), the group’s music is still on the platform.

Spotify says it no longer plans to issue annual guidance “since the vast majority of our initiatives are multi-year in nature and measured as such.” Quarterly guidance will still serve as checkpoints against progress for the company.

Spotify also says it plans to simplify by providing one estimate for each metric rather than the current range of outcomes. Spotify is also planning an investor day later this year to offer “an update on the strength of our platform and our advancement towards our long-term operating goals.”

The company’s promises to consumers concerning Spotify HiFi last year haven’t been met. Spotify said it would release more information about its higher-fidelity audio subscriptions last year, but it has yet to do so.

9 Responses

  1. Robert

    Everywhere you hear all the musicians complaining about making no money from their music. And then what do they do? NOTHING! Except keep on recording new music for sites like Spotify who pay them next to nothing. Great business model! And many Pro musicians have had to quit the music business. Revenues so small that they are all getting DAY JOBS to help pay their bills. Well, how about doing something for a change and BUILDING YOUR OWN PLATFORM with DIRECT SALES to the fans where YOU, the artists control the business? And not some Middle man, a BILLIONAIRE who used to run a TORRENT SITE! Sad that all the complaining continues and then nothing changes!! Maybe musicians could do something for a change. How about you all put TEN BUCKS into a ‘kitty’ to help build a site where the fans can buy your music directly from you and where YOU, THE MUSICIAN don’t get ripped off for a change!! Change coming in 2022. Or go get a day job like all the other Pro musicians!

    • I Could Have Been An Actor

      Robert,

      You act as if there was some magical time in the past when musicians made a lot of money. For decades, every professional gave away 85% of their earnings to their label. And that was after advancement recoup.

      If you’re a pro and still in a crappy deal, that’s your fault. You signed on the dotted line. Stop signing bad contracts. Lobby for contract reform and contract renegotiation.

      I know a lot of musicians who have figured it out and earn a decent living from streaming without hits. None of those people are complaining. You don’t hear anything from the people having this kind of success because they’re always working. They’re figuring it out. They’re not superstars. They try to help their friends, but their friends are lazy and just want to smoke weed and complain about everything.

      Besides, do you think a site like DMN is going to tout any successful artists on streaming, much less Spotify? No, because people love it when you lose, they love dirty laundry. Kick ’em when they’re up, kick ’em when they’re down.

  2. Robert

    As for the rest of Spotify’s Q2 2021, the company reported 365 million monthly active users—a growth of 22% YOY. Total revenue was €2.33 billion, or about $2.75 billion. That’s an increase of 23% YOY. Going forward, Spotify is forecasting 170 million to 174 million paid subscribers by the end of Q3 2021 and 177 million to 181 million paid subscribers at the end of Q4 2021.

  3. James

    Spotify has served us well for years. But now management decisions, competition, technology, and hardware have changed and Spot hasn’t adapted well. While Apple & Amazon were busy improving their music streaming product Spot was diversifying and adding podcasts. While others lowered pricing Spotify was under the impression that they could charge more for an inferior product. The only good news for Spotify recently is that no publicity is worse than bad publicity.

    • AppearingTonight

      Spotify has served major record labels well, everyone else has gotten screwed. Spotify and the labels colluded to defraud artist and songwriters, the labels got big up front payments are artist got ripped. It’s time to stop putting your music everywhere, put it with the streamers that pay the most, screw the rest . . . .

    • I Could Have Been An Actor

      James,

      Almost nobody uses Amazon for streaming music these days. Maybe a few years ago it was doing OK, but that site is dying.

      Apple claims all these subscriber numbers, but they are fake. They count every free promo with cell phone companies. Most people never use the free promo.

      • Henri Lattermore

        You’re wrong. Amazon is actually the second-most used streaming service, after Netflix. This ranking is not based on general subscribers, but actual use.

  4. Music Fairness

    Spotify is an example and open book of arrogance and pride! Spotify management steal $$ from artists, why? Because Spotify management are not as talented as songwriters, cannot make a living any other way than to steal from the talented. I hope and wish other artists would follow Neil Young’s example and depart from Spotify and other music platforms who’s management knowingly steal from talented artists who are the MAIN reason Spotify and other music platforms exist. Yes, it’s been a long time that music management have ripped and pilfered off of song writers, but it’s time that they are brought into the light. We hope that there is a music platform that is being created that all artists can be paid more than fairly so that all can enjoy their talent. We cannot enjoy Spotify’s talent – how they are performing now and treating others within and outside their organization puts a light on their talent which is: Spotify’s talent = Robbing talented musicians and treating others with distain. One day, Spotify will regret their actions and treatments of and to others. If this post is removed, this post will be posted at other posts indicating removing public opinion. And, any distain to this post is in support of Spotify’s militant money theft of talented artists. Musicians should ‘control’ music platforms. Spotify’s management is operating due to the musicians success, not the other way around. Spotify = Poor Management and Financial Theft and Lack of Talent.