Spotify added more subscribers than expected in the December quarter, propelling the streaming service to 155 million paying customers at year-end.
The company nevertheless issued conservative guidance for 2021, warning that it faced “substantial uncertainty” due to the “unknown duration of the pandemic”.
For the full year of 2021 Spotify predicted it would reach between 172 million and 184 million subscribers, an addition of between 17 million and 29 million paying customers.
This would mark a slowdown from 2020, when the streaming service added a record 30 million subscribers.
Shares in Spotify dropped more than 6 per cent in premarket trading.
The company’s quarterly results were rosier. Spotify added 11 million subscribers in the three months to the end of December, eclipsing Wall Street forecasts and its own guidance. Revenue grew 17 per cent from a year ago to €2.2 billion.
Spotify has invested nearly $1 billion in podcasting, buying start-ups and striking splashy content deals with stars such as Joe Rogan.
“Based on the behaviour we see when users first join Spotify, we are confident that podcast-usage has been a factor in the accelerated net additions,” the company told shareholders on Wednesday.
Spotify shares have more than doubled in the past year as investors cheered the company’s leap into podcasting and strong subscriber growth.
Citi analysts last month, however, poured cold water on the euphoria, arguing there is a “disconnect” between forecasts for Spotify’s financials and its stock valuation.
“We suspect this disconnect stems from recent enthusiasm around Spotify’s recent podcast pivot,” said Jason Bazinet, analyst at Citi. “But the cadence of premium gross addition and app-download data do not show any material benefit from recent podcast investments.”
Spotify’s average revenue it makes from subscribers, a key metric watched by investors, has been declining steadily as it has offered promotional discounts and expanded into countries such as India, where it charges subscribers a lower price. Average revenue per user dropped 8 per cent from a year ago in the December quarter to €4.26.
Podcasts
The music streaming leader has long resisted raising prices, which have hovered at about $10 a month in the US and Europe, as it focused on growth over profit.
But Spotify has recently been experimenting with price increases, noting that it has added a tremendous amount of music and podcasts to the app without charging users more.
Spotify in October raised the cost of its “family plan” tier in countries such as Australia, Belgium and Switzerland, and this month expanded the price rise to 25 more countries.
Paul Vogel, chief financial officer, told the FT in October: “We are aware [average revenue per user] has been coming down for a couple of years, and we have every incentive to start to get that moving in the right direction.” – Copyright The Financial Times Limited 2021
