Spotify has reported its financial results for the second quarter up to June 30.
The streaming giant added seven million subscribers and achieved record profitability in the three months.
“Our business continued to perform well in Q2, led by healthy subscriber gains, improved monetisation and record profitability,” said Spotify in its update to investors. “Although we did see another quarter of MAU variability, funnel conversion remained strong, particularly in developed markets where we recently adjusted pricing.”
Spotify’s monthly active users grew 14% year-on-year to 626 million, although that was below the guidance.
Subscribers increased 12% year-on-year to 246 million, adding seven million compared to the prior quarter – one million ahead of guidance.
Total Revenue was up 20% year-on-year to €3.8 billion, showing accelerating growth. Spotify said revenue was “tracking well” against the 2022 Investor Day goal of 20% revenue growth.
We keep on innovating and showing that we aren’t just a great product, but increasingly also a great business
Daniel Ek
Gross profit continued to surpass €1 billion for the second quarter in a row, while profitability (operating income) improved to a new quarterly high of €266 million.
Daniel Ek, Spotify founder & CEO, said: “It’s an exciting time at Spotify. We keep on innovating and showing that we aren’t just a great product, but increasingly also a great business. We are doing so on a timeline that has exceeded even our own expectations. This all bodes very well for the future.”
Spotify has made two UK price increases in the past year.
During the quarter, the company introduced its Basic plan in Australia, the UK and the United States to give eligible users the option for ad-free music listening without audiobook listening time.
For Q3, Spotify is forecasting that it will have 639m monthly active users (up 13m on Q2’s results) and 251m subscribers (up 5m on Q2).
During the earnings call, Daniel Ek was asked about the relationship with the music industry against the backdrop of the legal action taken by the Mechanical Licensing Collective. The case relates to Spotify’s assertion that its Premium Individual, Duo and Family subscription streaming plans are now classed as bundles in the US because those plans included access to audiobooks.
"I can’t really comment on anything about any sort of ongoing legal processes, but I will comment on something I’ve talked about quite a lot before, which is the nature of our relationship with the labels," said Ek. "I think a lot of people want to make this a zero sum game, where we have to win in order for them to lose or they have to win and then we sort of lose. It is not fundamentally how we view this at all.
"We look at it much more of a win-win, so overall whether on the publishing side or the label side, when I look at our numbers, we keep increasing our payouts year-over-year, so last year on the publishing side, we had record payouts in 2023. This year, 2024, we will beat those numbers and have even more payouts going on, and the same will of course be true on the label side, so it is not as much of a zero sum game as people make it out to be."
Ek added: "That’s not to say that we don’t quibble around various things at various points - that is the nature of all supplier and distributor relationships. But overall, I would say we have had healthy relationships with the music industry for the better part of now 18 years since I’ve been here at the company. There are always things that we’re arguing about for sure, but overall the music industry is growing. We are spending a lot of time and effort in making sure that it keeps growing. That is our primary thing that we’re doing as a company, and it’s something we deeply care about as the core mission of this company. I think that is recognised across the entirety of the music industry as well, and we feel good about that.
"You will always see us get into these sort of arguments about various things over time, but that said, the music industry is growing and we’re all as an industry focused on keeping that healthy growth to keep growing."
The Spotify co-founder and CEO also addressed the anticipation around a super premium subscription tier.
"What we do see is that there is a good subset of that group now of 246 million subscribers that want a much better version of Spotify, and those are huge music lovers who are primarily looking for even more flexibility in how they use Spotify and the music capabilities that exist on Spotify," said Ek. "I think this is a great way where I think we can create a win-win, both for the creative ecosystem but also for consumers as well.
"The plan here is to offer a much better version of Spotify, so think something that could be something like $5 above the current premium tier, so it’s probably around a $17 or $18 price point, but sort of a deluxe version of Spotify that has all of the benefits that the normal Spotify version has but a lot more control, a lot higher quality across the board, and some other things that I’m not ready to talk about just yet."
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