Spotify paying subscribers pass 200M, but quarterly loss climbs almost 700%

The number of Spotify paying subscribers passed 200 million for the first time in the last quarter. The company added 10M new subscribers to hit 205M paid accounts, and 489M in total. However, the company – which has almost never posted a quarterly profit – saw a dramatic increase in its quarterly loss, year-on-year …

Background

Streaming music is a tough business. Around 70% of revenue is paid to music labels, to be split between songwriters and artists, while all other operating costs have to be met from the remaining 30%.

Beats cofounder Jimmy Iovine said after joining Apple that there were no margins in the business.

“The streaming services have a bad situation, there’s no margins, they’re not making any money,” he said. “Amazon sells Prime; Apple sells telephones and iPads; Spotify, they’re going to have to figure out a way to get that audience to buy something else.”

For Apple Music, that’s not important – it’s another attraction of the Apple ecosystem, and helps the company sell everything from Apple Watches to HomePods. But for a long time, streaming music revenue was the only thing Spotify had.

An attempt to pivot to podcasts has met with mixed results, and a venture into hardware with the Spotify Car Thing was not a success.

Spotify paying subscribers pass 200M

Spotify today announced its latest numbers, with Monthly Active Users up 20% year-on-year to 489M, and paid subscribers up 14% to 205M

That’s no small achievement, especially given that Apple long ago stopped reporting its own numbers, with the last update way back in 2019, after hitting 60M. (The subsequent launch of Apple One in September of 2020 complicated matters, as Apple Music is included in all three tiers.)

But loses $292M in one quarter

Spotify’s problem is – and always has been – how to make money. It has made a loss in almost every quarter since launch. For Q4, the company’s quarterly loss jumped from €39M ($42M) to €270M ($292M) – almost a 700% increase.

That’s in part because the pandemic boosted demand for at-home entertainment, with a corresponding drop when lockdowns ended, but there’s also the fact that there’s an awful lot of small-print within that “Spotify paying subscribers” label. Among them:

• Discounted accounts (e.g., for students)
• Ultra-cheap subscriptions in some countries (sometimes just a few cents)
• Users on trial subscriptions costing as little as $0.99/month

Only Spotify knows the breakdown of those paid subscriptions.

Apple Music growth may have stalled, or grown only through the Apple One subscription, but the company is unlikely to be losing sleep over that fact. So long as the services covers its costs, the Cupertino company will continue to enjoy its enviable margins on the hardware customers use to listen to its streaming music service.

Photo: Omid Armin/Unsplash