Spotify Reports First Quarterly Profit, Paid Subscriptions Reach Almost 100m

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Today, Spotify has announced its first-ever quarterly profit as it revealed the results for the three months to the end of December 2018.

The Stockholm-based music-streaming company reported an operating profit amounting to €94 million (£82.5 million), as well as an increase in revenue amounting to 29 percent in the fourth quarter. This is attributed to an increased number of paid subscribers.

The streaming service reported revenue of €1.5 billion in the three months to the end of December 2018, an increase from the €1.15 billion reported the year before.

Despite the huge brand recognition of Spotify, the streaming service is more accustomed to reporting losses than profit as it pursues growth instead of earnings across its markets.

Its surprising jump in earnings was driven by an increase in premium subscriptions, with 96 million people now paying to use the service, a rise of 36 percent year on year. While ad-supported revenue increased to €175 million, the vast majority of the earnings of the company come from paid users.

The senior trends analyst at Global Web Index, Katie Gilsenan, stated: “Spotify remains the leader among the major music streaming services outside of China, but key to its continued success will be maintaining its ad-supported tier, which has so far ensured that it boasts a larger reach than any competitor.”

In a statement, the company stated: “Results for the fourth quarter 2018 outperformed our expectations and, for the first time in company history, operating income, net income, and free cash flow were all positive.”

However, the company predicts making another loss amounting to between €200 million and €360 million this year.

Nevertheless, the strong fourth quarter results of Spotify came as it revealed its purchase of two podcast firms in an attempt to boost its position as a leading podcast platform.

Today, Spotify confirmed that it will acquire podcast networks Anchor and Gimlet, however, it did not reveal the value of the deals. According to Recode which first reported the move, the deal with Gimlet is worth at least $200 million.

An equity analyst at Hargreaves Lansdown, Nicholas Hyett, stated: “Although there are some one-offs flattering the numbers this quarter, today still represents an important milestone.”

He added: “Spotify’s core business and geographies are looking increasingly comfortable, and while expansion into another 13 countries and development of advertising and artist tools is holding back the bottom line, it’s not a long term problem.”