SPOTIFY BASKS IN
SUNNY Q3 RESULTS

While the world was staying home this summer, Spotify’s monthly average users grew 29% over 2019's numbers to 320m, while the subscriber count was up to 144m, both of which were at the top of the company’s forecasts.

The success has led the streamery to start experimenting with increasing the monthly price of subscriptions.

Premium subscribers were up 27% in the quarter that ended 9/30, as Spotify launched new podcasts from Michelle Obama and Joe Rogan and benefited from new releases from superstars such as Taylor Swift and BTS.

Russia represented the largest portion of subscriber outperformance for the quarter and was the streaming service’s most successful new market launch to date. “Russia is the great proof of pent-up demand for Spotify,” Spotify CEO and founder Daniel Ek said on a conference call with analysts. The response “exceeded our wildest expectations.”

Latin America and places outside North America and Europe saw the fastest growth, rising 30% and 51%, respectively, in Q3 2020 over Q3 2019. India and Russia were key drivers.

“From a content-consumption standpoint, global consumption hours surpassed pre-COVID levels during the quarter, and all regions have fully recovered,” the company reported. “Consumption trends by platform have returned to normal usage, including in-car listening hours, which is now above the pre-COVID peak. Usage on connected devices inside the home, which saw a spike during lockdown, also remains above pre-COVID levels.”

Total revenue of €1.98b ($2.3b) grew 14% in fiscal Q3 or 19% on a constant currency basis. The depreciation of the U.S. dollar vs. the Euro was the primary driver of the variance. Premium revenue grew 15% over 2019 to €1.79b ($2.1b) or 20% in constant currency terms. Ad-Supported was up 9%. The company has a free cash flow of €103m, a €55m spike over 2019.

Ek noted that Spotify paid out more than €1b to rights holders in every quarter in 2020 and is on track to pay out another €1b-plus in Q4.

The quarter saw a 20% increase in the number of podcasts to 1.9m, including the July start of The Michele Obama Podcast and September’s premiere of The Joe Rogan Experience. On the music side, Swift became the most-streamed artist on Spotify any day folklore saw a release.

By the end of the year, Spotify expects total MAUs to be in the 340m-345m range and total premium subscribers to be between 150m and 154m.

Ek said the company has a new key measurement standard—value per hour. “I believe an increase in value per hour is the most reliable signal we have in determining when we are able to use price as a lever to grow our business," Ek said.

“And while it is still early, initial results indicate that in markets where we’ve tested increased prices, our users believe that Spotify remains an exceptional value and they have shown a willingness to pay more for our service. So as a result, you will see us further expand price increases, especially in places where we’re well positioned against the competition and our value per hour is high.”

He said the company would cautiously roll out price increases and that they would be “based on maturity in certain markets” and be conscious of the effect of COVID-19. Growth, he said, comes with signing up more subscribers and adding content. “We’re confident we have a long runway for growth. If listeners value us sufficiently, we can selectively raise our price.”

CFO Paul Vogel spoke more directly: “Where we have the opportunity to raise prices, we will.”