Spotify Beats Expectations for Paid Subscribers After Price Hikes to Hit 246M

Spotify hit 246 million paying subscribers in the second quarter of 2024, up 12 percent year-over-year.

Spotify Launches Less Expensive "Basic" Premium Plan, Without Audiobooks

The total number of paid subscriber additions, up 7 million, was 1 million above guidance. Shares of Spotify were up 14 percent in pre-market trading Tuesday.

Spotify added a less expensive ad-free plan in June, for $10.99 a month, which does not include its audiobooks offering. Prices had been raised on the other plans earlier that month.

“We’re seeing less churn in this round of increases, than we did in our prior one, which was already very low, by any measure,” Spotify CEO Daniel Ek said on the earnings call.

Ek also said the company eventually plans to offer an even more premium tier of Spotify, which could be $5 or so above the current premium tier pricing, with more enhancements. He said the plan is still in “early days” but that it’s something the company believes a subset of its consumers are asking the company for and stands to provide greater impact to the music industry.

“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 this normal Spotify version has, but a lot more control, a lot higher quality across the board,” Ek said.

The audio giant’s total number of monthly active users grew 14 percent year-over-year to reach 626 million, but came in under its prior guidance of 631 million.

The company noted that it saw another quarter of “MAU variability,” however “funnel conversion remained strong, particularly in developed markets where we recently adjusted pricing.” On the call, Ek clarified that the free ad-supported plans were more likely to be used in developing markets. The goal is to eventually convert those users to paid users, but Ek noted that “engagement looks different in these markets, as do the channels to acquire them and conversion to pay can be a bit slower.” The company is planning to increase its marketing efforts in those markets and add more to the free offering to improve its MAU growth.

Spotify reported total revenue of €3.8 million, in line with guidance, while operating income came in above guidance at €266 million. Operating income was helped by lower personnel and related costs and lower marketing spend, but partially offset by €59 million in social charges, which are payroll taxes associated with employee salaries and benefits in select countries.  At the end of Q2, Spotify’s workforce consisted of 7,372 full-time employees globally. Spotify laid off about 1,500 workers in December.

Billie Eilish Becomes the 3rd and Youngest Artist to Reach 100M Monthly Spotify Listeners

The company’s gross margin finished at 29.2 percent in Q2, up 510 bps year over year, which it said “reflects improvement across music and podcasting” but was partially offset by the cost of its audiobooks offering.

Ad-supported revenue grew 13 percent, with music advertising growth driven by gains in impressions sold and increased pricing. Podcast advertising revenue growth was driven by growth in impressions sold across Original and Licensed podcasts and the Spotify Audience Network, but partially offset by softer pricing.

Asked how Spotify’s podcast engagement has changed now that many podcasters are no longer exclusive to the platform and as more of the industry shifts towards video, Ek said engagement remains strong on the platform. He added that longer form video content tends to do particularly well on Spotify.

“I think, first and foremost, we are seeing very healthy engagement on podcasts. That has not changed me. What we’ve seen where we do have video podcasts is that engagement is even higher than what we’ve seen when it’s audio only,” Ek said.

“I don’t know where this will end but I think consumers today don’t really care too much about format,” he continued.

In the third quarter, the company is forecasting 251 million paid subscribers, a net addition of five million subscribers, and total MAUs of 639 million, up 13 million.

“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,” Ek said.

Spotify Renews 'The Louis Theroux Podcast,' With Season 3 Launching in September (Exclusive)