Apple and Spotify Are Still In A Race, How they Perform in 2019

Although Spotify remains ahead of rival Apple Music, it disappoints expectations a bit with only 108 million subscribers. Here are the details of the quarterly report

“We got lost on subscribers”. This was stated yesterday by the managing director of the Swedish music streaming platform Daniel Ek, communicating the results of the second quarter . Despite having reached 108 million new users, Spotify lacks analysts’ expectations on subscribers. At the same time, the app grew by 31% in revenues and reduced losses but was not enough to enthuse investors: Spotify shares slipped by more than 4% in pre-market exchanges. Here are the details.

The world’s most popular paid music streaming service has stated that premium subscribers have increased by 30% from a year earlier to 108 million by June 30, 2019. The analyst’s expectation of 108.5 million subscribers is very little paying. However, there is still a significant increase compared to 100 million paid subscribers that the company reported in April . In total, Spotify has 232 million active monthly users, including those registered to the free version of the platform. This is an increase of 29% year on year.

Spotify therefore reconfirms itself as the global leader in paid music streaming with a large margin. The number one Ek noted that quarterly subscribers grew 31% year-on-year, “which we believe is about twice the growth rate of our next closest competitor”. Without naming it, he was referring to Apple. The Cupertino giant said it had reached 60 million paying subscribers in June for its Apple Music music streaming service. A nice gap compared to the Swedish platform. However, in early 2019 Apple Music exceeded the total number of paid Spotify subscribers in the United States, the largest market in the world for recorded music. At the time, Apple Music had about 28 million US subscribers, compared to 26 million in Spotify. Not only,Financial Times reported that Amazon’s premium music streaming service, Amazon Music Unlimited, was growing faster than its rivals, Spotify and Apple Music . Spotify expects it could reach 125 million paid subscribers by the end of the fourth quarter, but the competition remains fierce.

Returning to the accounts, the rest of the results were largely better than forecasts. Spotify recorded an operating loss of 3 million euros on revenues of 1.67 billion euros (up 31%), better than analysts’ estimates for a loss of 56 million euros on sales of 1.64 billion euros . In the last quarter the Swedish company managed to reduce the loss: 76 million euros compared to 394 million euros a year earlier.

However, Spotify’s future profits and losses will depend on how its margins change during music label negotiations. In fact, most of the revenue generated by Spotify goes to record companies. In the spring, the company led by Ek began negotiations with the three main labels – Universal, Sony and Warner – plus Merlin, a group that represents independent record labels. However, yesterday did not reveal with which of these he reached agreements .

To differentiate itself from the competition, Apple and Amazon in particular, in addition to the music pieces Spotify is focusing a lot on podcasts. In April, the company revealed that it had acquired the Parcast (Cutler Media) podcast studio for about $ 56 million. Also in the first quarter, Spotify spent about $ 344 million to acquire two podcasting companies, Gimlet Media and Anchor FM. In addition to being cheap to produce, the podcast is an increasingly popular format, generating loyal fans and offering Spotify the opportunity to increase advertising revenue. Winning strategy so far: the company has declared that its podcast audience has increased by 50% since the last quarter.

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