Spotify Wednesday forecast current quarter revenue largely below analyst estimates, as the streaming service spends more on promotions to keep and lure listeners in its battle against Apple Music and Amazon.
Shares of the company were down 5 per cent at $148 (€134) before the bell.
Spotify’s paid subscriptions rose a better-than-expected 29 per cent in the fourth quarter largely from discounted promotional plans, but revenue missed Wall Street expectations.
Campaigns
The company ran several campaigns in the quarter, including a “3 months on us” intro offer for new users, and a win-back offer for returning customers.
Spotify is also spending more on podcasts, trying to keep pace with its two closest rivals - Apple Music with more than 60 million subscribers as of June and Amazon, which has more than 55 million subscribers globally.
Paid subscribers, which make up nearly 90 per cent of its revenue, tallied 124 million for the three months ended December 31st. Analysts on average expected 122 million, according to FactSet.
The company also forecast first-quarter premium subscriber numbers largely in line with estimates. It expects total premium subscribers in the range of 126 million to 131 million for the first quarter compared with the estimate of 128 million, according to FactSet Estimates.
But Spotify reported a decline in average revenue per user (ARPU) for the fourth quarter.
“Our ARPU was down 5 per cent in Q4 and we expect similar declines for 2020,” chief financial officer Paul Vogel said.
Spotify also said it bought Ringer, the sports and entertainment podcast network founded by Bill Simmons, for an undisclosed price.
Podcast
The company, which launched its music service over a decade ago, has invested over $500 million to build its podcast business and currently has over 700,000 podcast titles.
It has seen its podcasts such as the Joe Budden Podcast” and My Favorite Murder gain a loyal following, and bring in more ad dollars.
Fourth-quarter revenue rose to €1.86 billion from €1.5 billion a year earlier. Analysts were expecting €1.89 billion, according to IBES data from Refinitiv.
It also forecast first-quarter revenue below estimates. Spotify expects total revenue in the range of €1.71 billion to €1.91 billion for the first quarter. Analysts were expecting revenue of €1.9 billion.
The company reported a loss attributable to shareholders of €209 million or €1.14 per share, hurt mainly by social costs in Sweden. – Reuters
