Yeah I saw that, it’s bizarre. I suspect the case will fizzle out.
Overall what TIDAL has been trying to achieve under the new management is good for creatives, it’s just the execution has been a bit meh, from the awkward re-launch event onwards. Still, I wish them well.
It’s honourable what they are trying to do, but they are way too niche to even get amazon, Spotify or Apple to bat an eyelid
What’s holding $SPOT back? According to Professor Galloway:
SPOT’s 230mln MAU privide tons of data.
Disclosure: shareholder of $SPOT
In 2018, revenues from recorded music in the United States grew 12% to $9.8 billion at estimated retail value. For the third year in a row, double-digit growth was driven primarily by increased revenues from paid subscription services including Spotify, Apple Music, Tidal, Amazon and others, which reached more than 50 million subscriptions in the United States for the first time. Revenues measured at wholesale value also grew 12% to $6.6 billion. Revenue growth from streaming formats continued to be offset by decreases from unit-based sales, including both digital downloads and physical goods.
Spotify has just announced [its latest financial results], for the third quarter of 2019. The streaming service now has 248 million monthly active users (MAUs), up 30% year-on-year, having added 16 million in Q3.
113 million of those users are premium subscribers: 31% growth in the last year, with five million having been added during last quarter.
As for the actual financials, Spotify’s Q3 revenues grew by 28% year-on-year to €1.73bn, including 29% growth for its premium subscriptions (to €1.56bn) and 20% growth for its advertising revenues (to €170m). Subscriptions thus account for 90.2% of Spotify’s overall turnover.
The company reported an operating profit of €54m, compared to an operating loss of €6m in Q3 last year. Spotify also reported a quarterly net profit of €241m - if you’re startled at that, look to the line in Spotify’s filing where it reports ‘finance income’ of €226m, compared to €10m a year ago.
Spotify says that ‘developing regions’ played a role in its MAU growth outperforming expectations. “Growth in Latin America accelerated sequentially for the 2nd consecutive quarter as retention among newer users continues to improve. Southeast Asia remains our fastest growing region (excluding India),” explained the company.
And India? “India outperformed our forecast by 30% this quarter,” reported Spotify, citing the launch of its first ‘broad-based’ marketing campaign there since its launch in February.
Spotify took a swipe at its two biggest rivals in its financials announcement. “We continue to feel very good about our competitive position in the market. Relative to Apple, the publicly available data shows that we are adding roughly twice as many subscribers per month as they are,” announced the company.
“Additionally, we believe that our monthly engagement is roughly 2x as high and our churn is at half the rate. Elsewhere, our estimates imply that we continue to add more users on an absolute basis than Amazon. Our data also suggests that Amazon’s user base skews significantly more to ‘Ad-Supported’ than ‘Premium’, and that average engagement on our platform is approximately 3x.”
Spotify did admit that its advertising-revenue growth “underperformed our expectations” in the third quarter, blaming “self-inflicted implementation and integration issues we experienced with the rollout of a new order management software to replace Google’s Doubleclick Sales Manager which was sunset in July”. It was significant: around €9m of lost revenue, according to Spotify.
Spotify has also announced that its chief financial officer Barry McCarthy will retire in mid-January 2020, to be replaced by the company’s current VP of FP&A, treasury and investor relations, Paul Vogel. If shareholders approve, McCarthy is expected to be reappointed to Spotify’s board of directors, having held that role before taking the CFO job.
The company also offered some new figures for the growth of its podcasts business: hours streamed grew by 39% quarter-on-quarter “albeit off a small base”. As for listeners: “Podcast adoption has reached almost 14% of total MAUs”. That means nearly 35 million Spotify users are now listening to podcasts, globally.
Spotify now has more than 500k podcasts available on its service, and remains alive to label fears that this category could be cannibalising music listening and revenues. Spotify’s argument is that it’s actually persuading more people to start paying for a subscription.
“For music listeners who do engage in podcasts, we are seeing increased engagement and increased conversion from Ad-Supported to Premium. Some of the increases are extraordinary, almost too good to be true,” it claimed. “We’re working to clean up the data to prove causality, not just correlation. Still, our intuition is the data is more right than wrong, and that we’re onto something special.”
Spotify published its latest predictions for its end-of-year figures. It expects to have 255-270 million MAUs by the end of 2019 – that’s up from the 250-265 million prediction it made in its Q2 financials. Spotify also expects to have 120-125 million premium subscribers at the end of this year, which is an unchanged forecast.
The company also added in a note for investors (and music-industry partners) spooked by Spotify’s share price.
“Look back to March 2018 before our direct listing. Compare the Street’s expectations then for FY 2019 to our guidance now. The 12 month target stock price then was $181 and the consensus forecast (the average forecast of the 18 equity research analysts who covered us prior to 1Q18 earnings) for 2019 was actually lower than today’s guidance for this year’s results,” noted Spotify.
“The business is outperforming and the stock price is down 33% vs. the consensus. Sometimes the stock price reflects the performance of the business and sometimes it doesn’t. But eventually, it always does.”
We’ll see how the share price reacts over the course of today, and bring you more analysis in tomorrow morning’s Music Ally bulletin.
$SPOT holder here. Got in in $120s a share. Wild ride, even after Q3 earnings came out.
They said at a recent tech conference they have “machine learned” a lot of stuff since 2018 - this translates into recommendations, what you see in the home screen, etc. A very talented and respected team in the research community.
Still a wild ride since the IPO.
Spotify now has 248m listeners including 113m premium subscribers
Spotify CFO on streaming competition: ‘It’s our game to lose’
Q4 results out today:
They’re down ~5% pre market, but all that does is put it back to where it was at the beginning of yesterday.
They’re acquiring The Ringer, a media/podcast with 90 employees.
I went in on Spotify recently. But I’m not convinced acquiring media companies is the way forward.
Interesting all round. Wonder if other platforms will follow suit or whether they’ll find a different approach to help artists.
Spotify gets a bad rap for this but there is so many factors out of their hands - they can’t just pay artists more.
the royalty accounting model needs to change to pay indie artists better from streams alone. As that isn’t not at all easy to change, tipping is a good step - imo
Such a boring article.
If it’s the case, then all tipping in the world is a slap in the face for the recipients. Whether that’s musicians via Spotify, taxi drivers via Uber, or all the old world tipping from rounding up your change to the barber, to leaving 15% on your restaurant bill. The idea music needs to be treated differently to other products and services is crazy.
It’s not really the same. This comes across as underpaying the artist and letting the fans make it up in tips. I don’t know if that’s the fault of streaming providers, the record labels, or some other party.
Are people listening to more or less Spotify during lockdown?
The tipjar is an ok crutch, but I’d never pay for Spotify unless they moved to a per-user royalty method over the per-stream royalty method. If I pay $10 and only listen to one track that month, I’d like all my money to go to that one artist. Instead, all my money goes to Ariana Grande or some kpop bullshit.
How much would you say is correctly paying?
£10.98 is distributed per minute for a play on Radio 1. They have around 10 million listeners.
I don’t know how the record label splits it with the artists, producers, etc. and I’m sure it varies based on the deal between the label and the musicians.
But £30 for a 3 minute song played to 10 million people is 0.000003p per listener.
Apparently Spotify is paying 0.0084 cents per stream by a premium user. A bit less for a free one.
So Spotify pays more than Radio 1 but gets more criticism.
Isn’t the 10 million a “weekly reach” rather than active listeners?
Anyhow the two types of stream serve different purposes. Streaming platforms largely let you control what you want to listen to. Radio stations play maybe one or two songs which serve as a promotional tool.
Spotify pays less than most streaming providers but does pay more than a few. I think the reason Spotify gets the most attention is because they were there from day one setting the direction and also because they are to a large degree the top music streaming platform.
Like I said, I don’t know who’s at fault but given the need for ‘tips’ signals there might be a problem.
This. But in order for this to happen Arianna Grande et al need to agree to a pay cut… not going to happen