Spotify Hits 195 Million Paid Subscribers, Exceeds Monthly Active Users Expectations

Spotify Hits 195 Million Paid Subscribers, Exceeds Monthly Active Users Expectations

Music streaming giant Spotify reported 195 million paid subscribers in the third quarter of 2022, up from 188 million paid or premium subscribers in the previous quarter and above expectations.

The company had forecast it would hit 194 million premium subscribers this quarter. 

Spotify also exceeded its monthly active user expectations, reaching 456 million monthly active users in the third quarter, above its forecast of 450 million. In the second quarter, monthly active users hit 433 million, up from 422 million in the previous quarter.

Related Stories

The company now says it has 4.7 million podcasts. At the end of June, Spotify had 4.4 million podcasts on the platform, up from 4.0 million at the end of March. New additions this quarter included the launch of Meghan Markle’s podcast, Archetypes.  

Total revenue came in at €3.04 billion compared to a forecast of €3.0 billion.

Still, the continuing focus is on the company’s margins (which came in below expectations at 24.7 percent compared to the company’s estimate of 25.2 percent). The company said this was due in part to “slower than forecast advertising growth given the challenging macro environment,” as well as the expected renewal of a large publishing contract outside of the U.S. and currency fluctuations. Advertising was particularly impacted in Europe, according to the company. However, advertising only makes up a small segment of the company’s results. 

While podcasting has been gaining traction and ad revenue, the $1 billion investment to get there has weighed down the company’s profitability. In June, the company said it expected podcast margins to turn positive after 2022 — this year marked the peak negative impact on the margins — with the segment becoming profitable in the next one to two years.

Speaking on the earnings call Tuesday, Spotify CEO Daniel Ek said the results are still in line with that pledge, as well as the theory that this is an investment year for the company. 

“This is all playing out largely as we expected, despite the macro environment,” Ek said. 

Asked whether Spotify would consider raising prices in the U.S., as Apple Music and other competitors have, Ek said “it is one of the things that we would like to do,” and that the company will be having conversations with its label partners on that. 

In July, the company said it was preparing for an economic downturn — though it had not yet had much of an impact on its business — by slowing its pace of hiring by 25 percent. 

“I do believe only the prepared survive, and we’re preparing as if things could get worse,” Ek said at the time. 

On Tuesday, Spotify said it had not seen any “material impact” from the economic downturn, other than on its ad business. 

However, moving forward, Ek said the company will be “more selective” with its “overall spending.” Future investments will be made only if they are accretive to the company’s margin over the investment period and if they strengthen the company’s value proposition to users. Ek also noted that there may be new opportunities in an economic downturn. 

The company has also taken on other cost cutting measures. Earlier this month, Spotify canceled 10 original shows from its studios Parcast and Gimlet. This led to the layoff of 38 employees and pushback from their respective unions. 

On Tuesday, Spotify did not address the cancellations directly, but said that the restructuring should lead to “improved productivity at select studios” and appear as a one-time charge in the fourth quarter. 

At the same time, Spotify officially launched its audiobooks business in September, which it had been long promising as the next step in its business plan after its podcast push. The company chose an à la carte model at launch, in which users can check out individual books from a library of 300,000 titles. There are no ads yet for the audiobooks business, but the company has said it may explore that and other business models. 

While management did not release numbers yet on the launch, executives said they had seen “good engagement” with the segment, even as the purchasing experience has been not been ideal for iOS users. Ahead of the earnings call, The New York Times reported that Apple had rejected the Spotify app three times.

The company has also been experimenting with selling tickets. In August, Spotify launched a ticket selling website for select artists. Paul Vogel, Spotify’s chief financial officer, has characterized it as a means of boosting average revenue per user on the platform, as well as increasing listening hours for those artists. The company would not disclose any numbers on that effort Tuesday.