Spotify Q4 2018 Earnings Strong Subscriber Growth With a Hint of Profitability but Long-Term ARPU Deflation
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The 20,000 Foot View: Spotify finished 2018 strongly, over performing in both subscriber and ad-supported MAU additions. This was accompanied by Spotify’s first ever profitable quarter and two major podcast acquisitions early in 2019, hinting at a positive year ahead. However, at the same time, premium ARPU continues a long-term decline. This is the price Spotify is paying for maintaining global subscriber market share.
Key Findings
- Spotify hit subscribers, up from million in
- Spotify added net new subscribers in 2018, same as in 2017
- Ad-supported users strongly, adding million, which was more than the million added previous year
- Europe is a majority premium region for with of European MAUs in paying a subscription
- Year-on-year, North share of global subscribers decreased in 2017 to in 2018
- Annual European was largest with million registered 2018 – this was higher 2017, compared to a increase Latin America
- Globally, 2018 to Spotify improving conversion rates all markets, and potentially becoming majority premium business at some in 2019 or 2020
- Premium revenue Europe grew by in 2018 million net new revenue) compared annual growth in 2017 million new revenue)
- Ad-supported revenue by in 2018 (adding million new revenue) compared to million new revenue) in 2017
- Premium revenue new momentum, while ad-supported revenue to start delivering
- Following a of in 2018, Spotify brought churn rates down to in and then in 2018
- The cumulative of churn throughout the year an annual churn rate of from in 2017
- Spotify added gross new subscribers in 2018 to million in 2017
- Premium ARPU from in 2016 to in a fall of
- Over the period, ad-supported ARPU followed a opposite trend, growing from to
- Spotify slightly its global subscriber market share in 2018, up from in but is having to discount aggressively to do so
- Spotify’s average revenue per user (AARPU) grew just in 2018, but investments ad tech and infrastructure will see accelerated growth in 2019
- Podcasts are next big play, and will see Spotify commissioning top-quality radio from right under the noses radio companies
Companies and brands mentioned in this report: Amazon, Amazon Music Unlimited, Anchor, Apple, Apple Music, Gimlet, Spotify