Spotify Adds 2M Paying Subscribers in First Quarter Despite Hit From Russia Exit
Music streaming giant Spotify ended the first quarter of 2022 with 182 million paid subscribers, up from 180 million as of the end of 2021 but below its original 183 million subscriber forecast that was made before the company’s exit from Russia that led to the loss of around 1.5 million subscribers.
The company also said on Wednesday that it hit 422 million monthly active users (MAUs) as of the end of March, up from 406 million as of the end of December and ahead of its guidance.
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“Our premium subscribers grew 15 percent year-over-year to 182 million,” the company said. “While this is slightly below our guidance, after excluding the involuntary churn of approximately 1.5 million subscribers as a result of our exit from Russia, growth was above expectations and aided by outperformance in Latin America and Europe.”
The company did not detail any impact from controversies surrounding podcaster Joe Rogan, which led some to call for a boycott, during a morning analyst call. And after Netflix shook up the streaming space with its recent reduction in overall subscribers for the first time in 10 years, CEO Daniel Ek rejected comparisons between Spotify and Netflix as he addressed investors.
Ek argued Spotify and Netflix are media companies, but his company licenses content against Netflix increasingly producing its own original content. “We have a free service. Netflix does not. We have hundreds of millions of pieces of content. Netflix makes its own original content solely and licenses a bit. So it’s just vastly different businesses,” he said.
Spotify execs told analysts that a loss of subscribers in Russia as the platform winds down its business in that country after president Vladimir Putin’s invasion of Ukraine was offset by subscriber gains in Europe and Latin America.
Excluding the Russian user disconnects, Spotify estimated it will add around 6 million new subscribers worldwide in the second quarter. Ek also defended Spotify’s foray into podcasting, which includes podcast studios like The Ringer, Gimlet and Parcast, as the platform moves from being a music company to focusing on audio.
He pointed to a growing appetite for podcasts from consumers and creators. “You should expect us on a foundational business to grow the number of consumers and grow the number of creators,” Ek added as Spotify secures podcast partnerships for Spotify Originals with companies like the Obamas’ Higher Ground and Meghan Markle and Prince Harry’s Archewell Audio.
Spotify had previously forecast it would end the quarter with 183 million paying subscribers and 418 million monthly active users, marking a switch to providing single estimates for key metrics instead of the forecast ranges that it previously shared with investors and Wall Street analysts. The muted forecast came amid a growing list of musicians and podcasters who have protested the company’s handling of COVID-19 misinformation spreading on Joe Rogan’s Spotify-exclusive podcast, The Joe Rogan Experience, which has resulted in some users canceling their subscriptions.
Rogan himself said recently that the media frenzy over anti-vax conspiracy theorist guests and his past use of the N-word led to a gain of 2 million additional subscribers “during the height of it all.”
During the company’s fourth-quarter earnings call, Ek had said that it was “too early to know” what kind of subscriber impact could be attributed to users dropping their subscriptions because of Rogan. But the Spotify boss also noted that while Rogan “has a massive audience,” he also has to “abide” by the music streaming giant’s content policies.
In terms of the Russia impact, CFO Paul Vogel told an investor conference in March that Spotify was trending ahead of its first-quarter subscriber guidance before Russia’s invasion of Ukraine, but the decision to suspend the company’s premium service in Russia would lead the loss of about 1.5 million paying customers in the period. Spotify later “fully suspended” its services in Russia.
For the current second quarter, Spotify on Wednesday forecast that total MAUs would hit 428 million. This “reflects a loss from the closure of Russian operations, as well as the full reversal of the March service outage benefit (combined these two items reflect approximately 8 million of the 422 million MAUs reported in the first quarter),” the company said. “Excluding the impact of these items, our second-quarter guidance implies the addition of approximately 14 million net new MAUs in the quarter.”
Total premium subscribers would reach 187 million at the end of the quarter, Spotify projected. That “assumes an additional 600,000 disconnects from full closure of Russian operations in April,” excluding Russia, its guidance “implies the addition of approximately 6 million net new subscribers in the quarter,” it highlighted.
First-quarter advertising revenue at the Stockholm-based company grew 31 percent, and its podcast business also continued to expand. At the end of March, Spotify had 4.0 million podcasts on the platform, up from 3.6 million at the end of 2021. “Growth in the number of MAUs that engaged with podcast content continued to outstrip total MAU growth, podcast consumption rates grew in the double digits year-over-year, and podcast share of overall consumption hours on our platform reached another all-time high.” The firm also reported a double-digit increase in “new podcasts across key growth markets in Latin America and (the) rest of (the) world.”
The company added: “Podcast revenue strength was led by the Spotify Audience Network, along with continued growth across existing Spotify studios and our exclusive licensing deals.”
Total first-quarter revenue rose 24 percent, or 19 percent on a constant currency basis, to 2.66 billion euros ($2.82 billion). Spotify’s earnings rose from 23 million euros to 131 million euros ($139 million).
