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Spotify Hits 155 Million Paid Users, $9.5 Billion Revenue in 2020

Spotify's earnings for the fourth quarter of 2020 shot down any notion that high unemployment and worsening financial conditions would erode subscriptions.

Spotify’s earnings for the fourth quarter of 2020 shot down any notion that high unemployment and worsening financial conditions would erode subscriptions. Instead, Spotify added 11 million paid users, the most in a year, and 14 million ad-supported listeners.

The quarter “met or exceeded our guidance in nearly every metric,” CEO Daniel Ek said during the Feb. 3 conference call. Revenues improved 15.2% to €2.17 billion ($2.6 billion) from €1.86 billion ($2.23 billion) in the same period a year earlier. Subscribers grew 7.6% to 155 million from 144 million in the previous quarter. Annual revenues grew 16.5% from €6.76 billion ($8.12 billion) to €7.88 billion ($9.5 billion).


For the most part, investors aren’t sharing Ek’s enthusiasm. Within the first hour of trading, Spotify’s shares dropped 9% to $314 from Tuesday’s $345.05 closing price. Its 2021 guidance of between €9.01 billion ($10.8 billion) and €9.41 billion ($11.3 billion) was below the €9.28 billion ($11.15 billion) to €10.09 billion ($12.12 billion) analysts expected, according to Bloomberg. Other metrics also fell short. Spotify’s gross margin guidance of 23.5% to 25.5% was below J.P. Morgan’s estimates of 26.1%, while its guidance for subscribers of 172 million to 184 million was less than the firm’s 187 million estimate.

Even after Wednesday’s sharp share price decline, Spotify is well above the $313.38 media price target of the 24 equity analysts that follow the company, according to Refinitiv.

If Spotify’s earnings call were a rock song, the recurring guitar riff was the phrase “it’s early days,” or some variation. CEO Daniel Ek and CFO Paul Vogel emphasized throughout the call that audio platforms, podcasts and pricing strategies were still in their infancies. Podcasts, where Spotify is spending hundreds of millions of euros, are a prime example.

“We’re early on in podcast platform monetization efforts,” said Ek.


Most podcasts are self-funded, but Spotify hopes its November 2020 acquisition of Megaphone, a podcast advertising platform, will create podcasters new opportunities to make money.

Pricing is also a work in progress. Spotify’s tiered product offering — subscription, ad-supported and a la carte — is in its “evolution stage,” according to Ek. The standard fixed monthly subscription fee doesn’t work in every market. So Spotify introduced daily and weekly subscription plans in Indonesia and India, developing markets with a combined population of 1.64 billion.

If Spotify were a Michael Jackson song, its long-term vision would be “Don’t Stop ‘Til You Get Enough.” The 12-year-old company is still “in the investment phase,” Ek said, referring to Spotify’s spending on original podcast content, launching in new markets and new capabilities. Even with 345 million monthly users, growth still comes before profits. “We’re going after billions of consumers in the world,” Ek said. That’s a bold goal but attainable through large, developing markets. Indeed, Spotify expects to have up to 427 million monthly active users by the end of 2021 — that’s roughly one out of every 16 on the planet.

2020 full year results:

  • Overall revenue grew 3.2% from €6.764 billion ($8.13 billion) to €7.880 billion ($9.47 billion).
  • Operating loss deepened from -€73 million ($87.7 million) to -€293 million ($352 million).
  • Subscription revenue rose 15.2% to $1.89 million and accounted for 87% of total revenue (including advertising).

And the Q4 results:

  • Revenue rose 16.9% from €1.86 billion ($2.23 billion) to €2.168 billion ($2.6 billion) (24% at constant currency).
  • Operating loss improved from -€77 million ($92.5 million) to -€69 million ($83 million).
  • Gross margin percentage improved from 25.6% to 26.5%.

Listener metrics (compared to Q3):

  • Monthly active users grew 7.8% from 320 million to 345 million.
  • Subscribers grew 7.6% from 144 million to 155 million.
  • Free users climbed 8% from 185 million to 199 million.
  • ARPU declined 8% from €4.65 in Q4 2019 to €4.26 in Q4 2020 (but up from €4.19 in Q3 2020).
  • Monthly active users that listened to podcasts rose from 22% to 25% in Q4.
  • Podcast listening time doubled from Q4 2019 to Q4 2020.

Finally, 2021 guidance:

  • Total monthly active users: 407 million to 427 million
  • Total premium subscribers: 172 million to 184 million
  • Total revenue: €9.01 billion ($10.8 billion) to €9.41 billion ($11.3 billion)
  • Operating loss: -€300 million ($360 million) to -€200 million ($240 million)