By Akanksha Rana and Kenneth Li
(Reuters) – Spotify Technology SA, the world’s leading streaming platform, said on Monday it had hit 100 million paid subscribers as it reported a better-than-expected rise in first-quarter revenue.
The global leader in the sector, with double the number of subscribers of nearest rival Apple Music, Spotify has launched in places like India, the Middle East and North Africa in recent months, seeking to fuel the next stage of its development as it continues to price aggressively in the developed world.
The results helped ease concerns Spotify was under significant pressure from rivals such as Apple Inc, whose 28 million U.S. paid subscribers of its music service surpassed Spotify’s 26 million in earlier April. Amazon.com Inc has also launched an advertising-supported free music tier to its service.
“Competition is just not a big factor for us, it’s really all about growth,” Spotify Chief Executive Officer Daniel Ek said on a conference call after the release of the quarterly results. Ek reiterated the company planned to “keep on growing at more than 30 percent per year,” referring to revenue and users.
Shares of Spotify were largely flat at $138.30.
Growth in the quarter also had less of an impact than some analysts had anticipated on average revenue per user – 4.71 euros, or roughly flat with the same period last year – as the company expanded into markets where prices are lower and relied on promotions to find new subscribers.
“There had been a concern that Spotify’s forecast for strong subscriber net adds in (2019) would come at a cost to ARPU (Average Revenue Per User) as it relied more heavily on promotions and pushed into lower-ARPU regions such as India, but these results should go some way to easing those concerns,” Atlantic Equities analyst James Cordwell said.
Spotify said it had 217 million monthly active users (MAUs) in March, up from 173 million in the same quarter a year earlier. Analysts on average were expecting the company to have 218.6 million subscribers, according to research firm FactSet.
Premium or paying subscribers at the end of the quarter were 100 million, up from 75 million a year earlier. Analysts were expecting the company to have 99 million paid subscribers.
Revenue rose 33 percent to 1.51 billion euros ($1.69 billion), beating analysts’ estimates of 1.47 billion euros, according to IBES data from Refinitiv.
Gross margins for the quarter were 24.7 percent, above Spotify’s guidance of 22.5 percent to 24.5 percent, as it added more paying customers and gave away fewer promotional Google Home Mini smart speaker devices.
Europe contributed 40 percent of the total paid subscribers, followed by North America with 30 percent.
Spotify said it expects to have about 107 million to 110 million premium subscribers by the end of the current quarter and 117 million to 127 million subscribers by the end of the year.
Spotify also said it expects total revenue of 1.51 billion euros to 1.71 billion euros for the second quarter and 6.35 billion to 6.8 billion euros for 2019. Analysts were expecting it to forecast total revenue of 1.62 billion euros in the quarter and 6.67 billion for the year.
The company reported a loss attributable to shareholders of 0.79 euros per share. Analysts were expecting a loss of 0.35 euros per share.
Spotify said it has spent 308 million euros buying podcast companies Gimlet Media and Anchor FM and another 50 million buying Cutler Media LLC, the parent company of Parcast.
(Reporting by Akanksha Rana in Bengaluru and Kenneth Li in New York; Editing by Shailesh Kuber, Anil D’Silva and Paul Simao)
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