Spotify reported a mix of good news and bad in its latest quarterly earnings report. The good news was that Spotify paid users hit 236M, up 4% on the previous quarter. Subscribers on the free ad-funded tier grew even more, up 5% to 602M.
The bad news was that the company, which managed a rare quarterly profit in Q3, returned to being a loss-making business in Q4 …
Spotify paid users hit 236M
The company shared the numbers today, starting with the positives.
Monthly Active Users grew 23% Y/Y to 602 million, and 1 million ahead of guidance. Net additions of 28 million represented the second largest Q4 net addition performance in our history. Subscribers grew 15% Y/Y to 236 million. Net additions were 1 million ahead of guidance. Q4 net additions of 10 million contributed to a record full year of net additions of 31 million.
Revenue was also up 16% year-on-year, but a profit of €65M in Q3 turned into a €70M loss in Q4.
The company did put a positive spin on that, and there may be some justification for doing so.
Operating Loss was (€75) million for the quarter, which was better than our updated guidance. Excluding one time charges, we generated €68 million in adjusted Operating Profit, which is more than double the third quarter as the business continues momentum towards sustainable growth and profitability.
Much of those “one time charges” relate to the costs of the three rounds of layoffs the company made last year, in its attempts to stem its losses.
Battle with Apple continues
The company is currently engaged in a battle with Apple over the App Store changes the company is making to comply with European antitrust law. Spotify last month shared a preview of what it hoped would be the ability to offer in-app premium subscriptions – which would likely boost conversion, compared to the current experience of the app being unable to even tell you how to subscribe.
The company called Apple’s plans “outrageous” and urged the European Union to “act swiftly” to reject the iPhone maker’s proposed version of compliance with the Digital Markets Act. Apple fired back, stating that it had helped Spotify become “the most successful music streaming app in the world” – depending on how you define ‘success,’ I guess.
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