Spotify has announced its Q3 2019 financial and user metrics, revealing that it grew its total monthly active users (MAUs) to 248 million — up 30% on the 191 million it reported for the same period last year, and up 7% on the 232 million from the previous quarter.
The music-streaming giant is maintaining a roughly 45% ratio of premium to ad-supported subscribers, claiming 113 million paying users for the past quarter, up 31% from 87 million in the Q3 2018 period — and marginally surpassing the high-end analyst estimates.
Spotify attributed some of its net premium subscriber growth to the “strong performance” of its student and family plans, the latter of which received some notable upgrades in the past few months. Back in August, for example, Spotify introduced new content filters that allow parents to control what songs their children can access, in addition to a new family-focused playlist.
In terms of financials, Spotify reported revenue of €1.7 billion ($1.9 billion), up 28% year-on-year (YoY) and 4% quarter-on-quarter (QoQ). The company also turned an operating profit of €54 million ($60 million), compared to a small YoY and QoQ loss on the previous figures — this was driven in part by a higher gross profit and a “lower-than-expected” spend across areas including artist marketing, original content promotion, and R&D. However, Spotify anticipates returning to a loss for Q4 2019, estimating that its operating loss will fall somewhere between €31 million and €131 million ($34 million – $145 million).
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Spotify also used its Q3 earnings report to announce that chief financial officer (CFO) Barry McCarthy will be leaving the company in January after nearly five years, with Paul Vogel — current head of FP&A, treasury, and investor relations — taking over.
Retention
Though Spotify’s bottom line is of course an important factor for Wall Street, it’s the company’s longer-term prospects relating to its user numbers that are of particular note, specifically in relation to the competition. Back in June, Apple announced that Apple Music had 60 million users, a figure that has likely increased a bit in the subsequent four months. But globally, Spotify continues to dominate both in terms of overall user numbers and those on a paid plan.
“Relative to Apple, the publicly available data shows that we are adding roughly twice as many subscribers per month as they are,” Spotify said in its report. “Additionally, we believe that our monthly engagement is roughly 2 times as high and our churn is at half the rate.”
Despite past criticism over Spotify’s continued adoption of a free streaming plan, the plan remains an important tool for the company, allowing it to lure new users on board so it can persuade them to upgrade to a paid tier. Premium subscriptions continue to be the main revenue driver for Spotify, representing more than 90% of its income in Q3.
“We rolled out a number of tests in Q3 with the goal of immersing new users in the product functionality faster,” the company said. “It’s still early, but we are encouraged by the improvements we’ve seen in retention to date. Our belief is that a better onboarding experience leads to increased engagement, which leads to better retention, conversion, satisfaction, and ultimately, lifetime value.”
Finally, a growing part of Spotify’s retention plans include podcasting, which it has invested heavily in over the past year. As such, Spotify broke out podcast-specific numbers for its Q3 financials, revealing that 14% of its users listened to a podcast during the last quarter, which equates to roughly 35 million people.
