Spotify benefits from subscriber surge amid Covid-19 lockdowns
Streaming companies in general are benefiting from people staying at home, with Spotify’s monthly active users rising 31% in the quarter
Bengaluru/New York — Spotify Technology’s paid music subscribers surged to 130-million in the first quarter, driving shares in the Swedish music streaming firm higher as its business model proved more resilient than expected in the coronavirus lockdowns.
A double-digit rise in quarterly revenue helped the company weather a virus-related decline in ad sales, which contributed less than 10% to overall revenue.
But Spotify, which earns from a mixture of subscriptions and showing ads to non-paying users, continued to solidify its commercial lead in streaming over Apple and Amazon.
“Despite all the turbulence around the world, we hit pretty much all the metrics,” Spotify CEO Daniel Ek told Reuters.
The company said it started seeing a fall in users in late February in countries most affected by Covid-19, such as Italy and Spain, but has seen meaningful recovery in the past few weeks.
Ek credited the company’s more than 300 partnerships with device makers and its expansion into podcasts as a few reasons for its continued appeal to an audience now trapped at home.
“Working from home appears to be increasing streaming services in general, so we don’t see users choosing between Netflix and Spotify,” Cascend Securities analyst Eric Ross said.
While usage on mobile devices and in cars dropped in the last few weeks of March, usage on video game consoles, such as Microsoft’s Xbox and Sony’s PlayStation, surged during the first quarter.
Overall, monthly active users, a key metric, rose 31% in the quarter, in line with Spotify’s forecast.
Spotify’s subscriber and user metrics proved resilient, while the ad business was challenged, which is less of a focus, Evercore analyst Kevin Rippey said.
For the second quarter, Spotify expects premium subscribers in the range of 133-million to 138-million. Analysts were expecting 136.5-million, according to IBES data from Refinitiv.
It forecast total revenue in the range of €1.75bn to €1.95bn, below expectation of €2.02bn.
First-quarter premium subscribers rose 31% from a year earlier. Analysts were expecting 128.6-million.
Revenue rose 22% to €1.85bn, but missed the average analyst estimate of €1.86bn.
For 2020, Spotify reduced its revenue target to €7.65bn to €8.05bn, from €8.08bn to €8.48bn, due to changes to foreign exchange rates and a lower ad sales expectations.
Shares of Spotify rose 10% to $153.19 in trading before the bell on the New York Stock Exchange.