It’s all action in the world of Spotify. The past 24 hours have brought some big changes, alongside the company touting some “exceptionally strong MAU and Subscriber results” for Q2.
First things first, yesterday Spotify revealed that it is finally following the likes of Netflix and more in increasing its subscription rates – something many in the music industry have long been calling for – in over 50 markets, including the US and UK.
“The market landscape has continued to evolve since we launched,” the streaming giant said in a press release. “So that we can keep innovating, we are changing our Premium prices across a number of markets around the world. These updates will help us continue to deliver value to fans and artists on our platform.”
In the UK, the price of a Premium Individual account is changing from £9.99/month to £10.99/month. The cost of a premium duo plan, meanwhile, will now be £14.99 and a family plan will be £17.99. The student plan will remain unaffected.
But that’s not the only news coming from Spotify.
Q2 RESULTS
Back in April, Spotify issued its Q1 2023 financial results, revealing that the company added five million subscribers in the quarter. So where does the streaming giant stand now that Q2 has wrapped? Well, they are reporting “all time high monthly active users (MAU) growth” and their “strongest Q2 to date for subscriber net additions”. Broken down, it looks something like this:
SUBSCRIBERS
Spotify have reported a 27% surge in monthly active users, taking it to 551 million. These net additions of 36 million are “21 million ahead of guidance” and represent “an all-time high for the company.”
What do they put this down to? Well, within this, Spotify cited "Strong growth amongst Gen Z listeners", "outperformance across all regions led by Rest of World and Latin America", "continued improvements in Ad-Supported retention and performance marketing efficiencies" and "shifts in competitor dynamics in select developing markets".
Spotify’s Premium Subscribers grew 17% year-on-year to 220 million. Net additions of 10 million were “three million ahead of guidance” and represent the highest Q2 in company history.
Within this, Spotify said “all regions outperformed and saw higher MAU net additions relative to the prior year period, aided by improved retention and marketing efficiencies.”
REVENUE
Spotify’s total revenue grew 11% year-on-year to €3.2 billion, in-line with guidance.
Overall we are encouraged by the strength we saw in Q2 and our momentum heading into the back half of 2023
Spotify
PROFITABILITY
Spotify’s gross margin in Q2 stood at 24.1% in Q2, down 47 bps year-on-year. This, it said, was “due to €44 million in net charges primarily related to the shut down of various podcast shows and the impairment of excess real estate.”
Excluding these charges, Adjusted Gross Margin* was 25.5% and up 22 bps Y/Y, reflecting:
Spotify’s operating Loss of (€247) million in Q2 was impacted by €135 million in net charges. These charges included “the aforementioned impact to Gross Margin and an additional €91 million related primarily to our real estate optimization plan and severance.”
Spotify said its Adjusted Operating Loss of (€112) million was "better than guidance, excluding charges related to our actions in the quarter to streamline operations and reduce costs."
In its shareholder presentation, Spotify said: “Reported Gross Margin and Operating Loss were both primarily impacted by charges related to our actions to streamline operations and reduce costs. Excluding these items, Adjusted Gross Margin of 25.5% was in-line and up 22 bps year-on-year (consistent with how we guided the quarter). Adjusted Operating Loss of (€112) million was better than guidance, aided by lower marketing spend. Free Cash Flow was €9 million in the quarter.”
“Overall, we are encouraged by the strength we saw in Q2 and our momentum heading into the back half of 2023,” concluded Spotify in its message to shareholders.
Subscribers can revisit our interview with Safiya Lambie-Knight, Spotify's head of music for the UK & Ireland here.
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