Spotify posted some strong user growth numbers in the second quarter but suffered a substantial decline in advertising revenue…
The pandemic and ensuing shutdowns have had a peculiar impact on certain industries. But for streaming platforms, there’s largely good news. However, not all that unfolded was positive. Spotify is a prime example, as the music streaming service experienced a swell in its user base but sustained a hit to its ad-producing revenue.
Spotify’s Monthly Active Users are Up but Ad Revenue is Down
Spotify experienced a 29 percent rise during the quarter, reaching 299 monthly active users. Additionally paid subscription growth exceeded analysts’ expectations, accumulating 138 million subscribers versus forecasts of 136.4 million. Although, its advertising revenue slipped 21 percent in a year-over-year comparison to $170 million.
But, the company’s Premium tier (which remain the majority source of approximately 90 percent of its revenues), did increase by 17 percent to hit $2.07 billion. Spotify also enjoyed growth in its more expensive Family Plan, along with its new Duo option. This, as well as expanding to more markets, contributed to its overall growth.
Spotify explains in a shareholder letter:
“Last quarter we noted a marked deceleration in sales brought on by the global health crisis where the last three weeks in March were down more than 20% relative to our forecast. Performance continued to lag our expectations through April and May, but we significantly outperformed expectations in the month of June. [Quarter to date] through May, ad-supported revenues were down 25% year-over-year, but performance in the month of June showed significant improvement and was only down 12% year-over year.”