Music streaming giant Spotify on Monday reported a swing to a third-quarter operating profit and said it grew its user base to 113 million premium, or paid, subscribers and 248 million total active monthly users as of the end of September. That compared with 108 million premium and 232 million total active monthly users as of the end of June, 100 million premium and 217 million monthly users as of the end of March and 96 million and 75 million, respectively, as of the end of 2018.
The company’s third-quarter user figures exceeded Wall Street estimates. “Net subscriber growth exceeded our expectations and was led by strong performance in both Family Plan and Student Plan,” leaving premium subs up 31 percent over the year-go period, the firm said. “Total monthly active users grew 30 percent…outperforming the high end of our guidance. Developing regions continue to be a significant driver of this outperformance.”
Said Spotify: “We continue to feel very good about our competitive position in the market. Relative to Apple, the publicly available data shows that we are adding roughly twice as many subscribers per month as they are. Additionally, we believe that our monthly engagement is roughly two times as high and our churn is at half the rate. Elsewhere, our estimates imply that we continue to add more users on an absolute basis than Amazon. Our data also suggests that Amazon’s user base skews significantly more to ‘ad-supported’ than ‘premium,’ and that average engagement on our platform is approximately three times [theirs].”
The company, led by Spotify CEO Daniel Ek, swung to a third-quarter operating profit of $59.9 million (54 million euros), compared with an operating loss of 6 million euros in the year-ago period. Net income rose from 43 million euros to $267.4 million (43 million euros). Quarterly revenue rose 28 percent to $1.92 billion (1.73 billion euros), while operating expenses increased 11 percent.
Spotify forecast it would end 2019 with 255 million to 270 million monthly active users, which came in above previous expectations, and 120 million to 125 million premium subscribers.
The company also announced transition plans for a new CFO. “After playing a pivotal role in Spotify’s listing and helping to establish Spotify as a public company, Barry McCarthy will retire from Spotify on January 15, 2020, stepping down as the company’s CFO,” the company said. He will be replaced by Paul Vogel, who is currently Spotify’s vp financial planning and analysis, treasury and investor relations.
McCarthy, a former Netflix CFO, oversaw the company’s direct stock market listing and ran its financial operations for the first year and a half after that.
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 that Spotify was looking to avoid a marketplace with a “small group of dominant platforms.”