Spotify on Wednesday reported subscriber growth for the fourth quarter of 2020 that beat Wall Street expectations.
For the three-month period ending December 31,2020, Spotify added 25 million new monthly active users, pushing its total to 345 million up eight percent consecutively and 27 percent year-over-year. As for premium (paying) subscribers, Spotify added 11 million in the quarter to finish at 155 million.
However, despite the growth in listeners, The Wall Street Journal notes that the average revenue per user fell by 8 percent to €4.26 (around $5.13) compared to a year ago. That’s because of the discounted plans used to lure in new subscribers, and the lower prices it charges in markets like Russia and India. Ad revenue was up, however, accounting for 13 percent of revenue despite historically bringing in less than 10 percent.
Overall Spotify still made a loss of €125 million, but that’s down from the €209 million loss it made the year before. It’s rare for Spotify to post a profit as the company continues to invest in growth, according to The Wall Street Journal.
Spotify is also investing heavily in podcast. This quarter, the company continued to sign big names for its podcast business like Prince Harry and Meghan Markle, and Ava Duvernay. It now offers more than 2.2 million podcasts through its service, with podcast consumption up nearly 100 percent compared to the same time a year ago. Spotify says that 25 percent of its users engaged with podcast content during the quarter.
Spotify has argued that its investment in podcasts in particular increases usage, engagement, and customer retention, and present an opportunity for it to decrease its reliance on licensing music from labels. Spotify reiterated that belief in today’s earnings release.
Looking ahead, Spotify said it is facing “increased forecasting uncertainty” compared to previous years due to the pandemic and its ongoing effect on user, subscriber and revenue growth. That said, the company expects Q1 total monthly active users to be between 354 million and 364 million. Total premium subscribers, meanwhile, are forecasted to reach between 155 million and 158 million.
