Spotify is racing to sign up users before Apple Music can, even at the expense of its finances. Spotify’s second quarter as a public company saw mixed performance compared to estimate as it reached 83 million paid subscribers, up 40 percent year-over-year and up 8 million from its 75 million count last quarter. Spotify now has 180 million total users, coming in at the high end of its guidance with a 5.9 percent quarter-over-quarter growth rate, though it added fewer users than last quarter.
But Spotify saw trouble with its finances. The company had €1.27 billion ($1.49 billion) in revenue, up 26 percent year-over-year and in line with estimates, but it missed big on EPS where it saw a loss of -€2.20 compared to estimates of -€0.68. Spotify lost €394 million this quarter, showing it’s still a ways off from becoming profitable under the heavy strain of its high royalty payments to record labels and artists.
For comparison, Apple Music has 40 million subscribers, though is rumored to now possibly have more in the US than Spotify. Spotify now says it has 31 percent of its subscribers, or 25 million in North America as a whole.
Forecasts for Q3 see the company expecting 188 to 193 million users and 85 million 88 million paid subscribers, with €1.2 billion to €1.4 billion in revenue.
Spotify’s average revenue per user also dropped 12 percent because it used promotions like a $13 bundled subscription with Hulu to attract more subscribers. Still, that could be a smart bet for Spotify long-term. Music isn’t going anywhere, so whichever streaming service can lock in subscribers now by gathering personalization data and getting them to build playlists could earn monthly fees from them long into the future.
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