Spotify Projects Shrinking Losses, Nearly 100 Million Subscribers By Year's End

Spotify 2017
Tim Warner/Getty Images for Spotify

A view from the crowd during Spotify's RapCaviar Live in Houston at Revention Music Center on Dec. 14, 2017 in Houston, Texas.  

A week before its Wall Street debut, Spotify is painting a fairly rosy financial picture for the remainder of 2018, complete with double-digit increases in revenue and paid subscribers to go along with smaller losses.

The music streaming company said on Monday (March 26) that it expects revenue to top €4.9 billion-€5.3 billion ($6.1 billion-$6.6 billion) in 2018, up 20-30 percent year-over-year. However, that forecast would miss the nearly-40 percent growth that the company recorded in 2017, compared to the previous year.

For the first quarter, Spotify expects total revenue to hit €1.10 billion ($1.37 billion), up 22-27 percent year over year.

Operating losses for the full year should not cut as deep as 2017, the company said, amounting to a projected €230 million-€330 million ($286 million-$410 million), which would mark an improvement over 2017 when debt financing charges contributed to losses of €378 million ($470 million). The projection for 2018 takes into account the €35 million-€40 million ($43 million-$49 million) in costs associated to its upcoming listing.

Notably, Spotify has no more outstanding debt, thanks to a deal that saw two of its shareholders, TPG and Dragoneer, convert their debt into equity and sell their shares to new Spotify investor Tencent.

Spotify recently announced it will launch a direct listing of its shares on the New York Stock Exchange on April 3.

At the time of its filing to the SEC last month, the company revealed that its number of paid subscribers around the globe grew 46 percent year-over-year to 71 million subscribers in 2017, and that its number of total monthly active users reached 159 million. In its newly-released guidance, Spotify expects those numbers to rise to 92 million-96 million subscribers, and between 198 million-208 million MAUs for 2018, increases of 26-32 percent and 30-36 percent year-over-year, respectively. At the end of Q1, the company said it should have between 73 million-76 million premium paid subscribers. It also expects total MAUs to reach 168-171 million this month.

Gross margins for the year and first quarter are expected to rise between 23-25 percent.

Last week, the RIAA released its 2017 year-end report on the U.S. recorded-music business, which noted that the industry's 16.5 percent year-over-year growth was largely driven by a 43 percent boost in streaming revenue, which accounted for 65 percent of the total revenues for the industry. (Paid streaming alone accounted for 47 percent of all revenue, passing $4 billion for the first time.) Within that, the average number of paid streaming subscribers in the United States grew 56 percent, to 35.4 million subscribers, up from 22.7 million in 2016. Spotify reports subscriber numbers globally but does not break out its numbers by region or country; the IFPI's global revenue report, which last year said that the total number of global streaming subscription accounts had grown to 97 million in 2016 from 68 million the year prior, is expected in April.