Spotify added 7 million subscribers in the second quarter, about a million more than forecast, and that boosted revenue, margins and the company's stock price, which rose 12% on Tuesday morning.
Spotify reported 3.8 billion euros ($4.15 billion) in total revenue in the second quarter, a 20 percent increase over the year-ago period and a record gross margin of 29.2 percent due to favorable music content costs, executives said. Spotify's operating income rose for a second straight quarter to 266 million euros ($289.6 million) on a higher gross margin and lower marketing, personnel and other expenses.
Spotify's 626 million total monthly active users (MAUs) missed the internal target of 631 million MAUs set last year, but the company grew premium subscribers by 1 million more than forecast while raising prices again in the US. This increase brings the total number of premium subscribers to 246 million.
“Overall, we are encouraged by the traction we are seeing from our monetization initiatives and remain focused on achieving the goals set at our 2022 investor day,” the company said in a statement.
Premium subscriber revenue grew 21% year over year thanks to these subscriber gains and 10% higher average premium revenue per user (ARPU). Revenue from ad-supported users grew 13%.
The price of Spotify's premium individual plan in the US rose $1 to $11.99 a month, and its duo plan jumped a dollar to $16.99 a month in July.
Spotify is under pressure from major music companies and organizations to reverse changes it made in May to its bundled subscription services that added audiobooks to its premium tier. As a result, Spotify said it will pay songwriters a reduced package price for premium streams. Advertising sign estimates that the move, which reclassified premium, duo and family subscription services as “group subscription services,” could cut royalty payments to songwriters and music publishers by $150 million in the first year.
Groups like MLC are suing Spotify, claiming the streamer “misclassified” its premium tiers as bundles.
Spotify CEO Daniel Ek declined to comment on the MLC lawsuit during a call discussing his company's results. He defended the amount of publishing and engineering royalties Spotify pays stakeholders and described his company's relationships with music companies as “healthy”.
“We continue to increase our payouts every year,” Ek said. “It's not as much of a zero-sum game as people make it out to be. There are always things we argue about for sure. But overall the music industry is growing. We are putting a lot of time and effort into making sure it continues to grow.”
Lower staff costs helped boost operating income in part due to staff cuts the company made last December.
Top results for Q2:
- Total revenue of €3.8 billion reflected premium subscriber revenue up 21% and ad-supported revenue up 13%.
- Gross margin of 29.2 percent beat the company's growth forecast due to improved music and podcast profitability, the company said.
- Operating income also beat guidance at €266 million due to lower staff and marketing costs.
- Total monthly active users (MAUs) were 626 million in the second quarter, up 14% from a year ago.
- Premium subscribers totaled 246 million and ad-supported MAUs totaled 393 million, up 12% and 15% respectively from a year ago.
- Average revenue per user (ARPU) increased 10% from last year.
from our partners at https://www.billboard.com/pro/spotify-earnings-q2-new-subscribers-revenue-operating-income/
