Spotify outlook weakens as pandemic uncertainty persists

Platform News: Spotify music streaming app based out of Sweden

Spotify has forecast revenue and paid subscribers would miss Wall Street estimates this quarter due to growing uncertainty over how long the COVID-19 crisis would last.

Shares of the Swedish company were down 7% in premarket trading.

The company has seen a significant increase in paid subscribers during the COVID-19 global pandemic as people have been locked down at home and in the fourth quarter beat revenue estimates as it hit 155 million paid subscribers for its premium service.

While advertising was hit by the pandemic, it had little impact on subscriber growth, and may actually have contributed to pulling forward new sign-ups, Spotify said in a statement, adding that total monthly active users rose by some 27% to 345 million.

“We do believe that probably some of the growth in 2021 may have been pulled forward into 2020,” CFO Paul Vogel told journalists at our partner news agency Reuters.

“Russia for example performed extremely well in 2020 while a lot of our expectations initially were we wouldn’t really hit our full stride there until 2021.”

While Spotify’s expansion drive has made the service available in 93 countries, about 40% of its paid subscribers come from Europe.

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Premium subscribers, who account for most of Spotify’s revenue, were up 24% in the fourth quarter from a year earlier, beating estimates of 153.26 million.

It, however, expects total premium subscribers in the range of 155 million to 158 million for the first quarter, whereas analysts were expecting it to hit 163.5 million.

The company expects quarterly revenue of 1.99 billion to 2.19 billion euros, short of expectations of 2.23 billion.

Spotify, which launched its service over a decade ago, has spent hundreds of millions of dollars to buy podcast companies such as Bill Simmons’ Ringer in an effort to become the “Netflix of audio content”.

Spotify offers more than 1.5 million podcast titles such as “The Joe Rogan Experience”, which is amongst the most listened too and popular podcasts in the world, “Mama Knows Best” by Addison Rae and a newly launched politically correct podcast one by Prince Henry (aka Harry) and his wife Rachel (aka Meghan).

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While some analysts have said that there was no material benefit from podcast investments, Spotify Chief Executive Officer Daniel Ek said “podcasts increase overall engagement and retention”.

“We are in the midst of a multi-year effort of that investment and you should expect that investment to keep on happening in the coming years, for sure,” Ek told journalists.

“You can already see 22% to 25% of the user base now listening to podcasts and it’s showing meaningful improvement quarter by quarter.”

The team at Platform Executive hope you have enjoyed this news article. Translation from English to other languages via Google Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by Supantha Mukherjee in Stockholm. Editing by Alexander Smith and Jason Neely.

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