Spotify Ups Paid User Base to 108 Million, Narrows Losses in Second Quarter

Daniel Ek
Ilya S. Savenok/Getty Images for Spotify

Founder and Chief Executive Officer of Spotify Daniel Ek speaks onstage during Spotify Investor Day at Spring Studios on March 15, 2018 in New York City. 

The streamer also announced it has secured new licensing deals with two major label partners.

Music streaming giant Spotify on Wednesday reported a smaller second-quarter operating loss and said it grew its user base to 108 million premium, or paid, subscribers and 232 million total active monthly users as of the end of June.

That compared with 100 million premium subscribers and 217 million total active monthly users as of the end of March and 96 million and 75 million, respectively, as of the end of 2018. 

In comparison, Apple Music had 60 million subscribers as of June, including people on a three-month free trial. (Spotify's figures include people on a 30-day free trial.)

The company, led by CEO Daniel Ek, also announced two new deals with major music labels. "We have reached agreement with two of our four major label partners on the renewal of our global sound recording licenses, and are in active discussions with the other two," it said without disclosing which labels it has struck deals with. "This is the sixth round of label negotiations we’ve worked through in our 13 year history and, while it is typically a long drawn-out process, it has become part of the normal cadence of the business." 

Spotify said its second-quarter operating loss amounted to $3.3 million (€3 million euros), compared with €90 million. The firm's net loss narrowed to $84.7 million (€76 million) from €394 million in the year-ago period. Quarterly revenue rose 31 percent to $1.86 billion (€1.67 billion), while operating expenses increased 4 percent.

Of that revenue tally, the vast majority, $1.67 billion (€1.502 billion), came from premium subscribers, amounting to  an increase of 31 percent year over year; ad-supported revenue totaled $184 million (€165 million), an increase of 34 percent y/y.

The company's second-quarter user figures exceeded Wall Street estimates, while its paid subscriber result came in below the midpoint of its own forecast.

"We finished the second quarter with 108 million premium subscribers globally, up 31 percent year-over-year, but below the midpoint of our guidance range of 107-110 million," the company said. "Intake from our bi-annual campaign was in line with our expectations, monthly churn declined both sequentially and year-over-year to a record low 4.6 percent, and our winback percentage on gross ads reaccelerated quarter-over-quarter. However, intake into our student product was below plan. As we have discussed previously, our goal is to perform at roughly the 70th percentile of our guidance range and we missed on subs. That’s on us. The good news is that the shortfall was execution related, rather than softness in the business, and we expect to make up the lost ground before year-end."

Looking ahead, the company expects to add between 2-6 million premium subscribers in Q3 and possibly return to a small operating profit. By the end of the year, Spotify hopes to have between 120-125 million paid users and as many as 265 million total MAUs.

Spotify earlier this year filed an antitrust complaint against Apple in Europe. "In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience — essentially acting as both a player and referee to deliberately disadvantage other app developers," Ek said back then, adding Spotify was looking to avoid a marketplace with a "small group of dominant platforms."

A version of this article was originally published by The Hollywood Reporter.