Spotify on Wednesday published its financial results for the fourth quarter (Q4), which ended on 31 December 2020.
The report shows the company added 11 million Premium subscribers, bringing the total to 155 million in the quarter. The total figure represents a 7% increase on the 144 million from the previous quarter, and a 24% jump (31 million) year-on-year.
Monthly active users (MAUs) climbed 27% year-on-year to reach 345 million in Q4, and increased by 8% from the 320 million in the previous quarter. Spotify’s Premium subscriptions generated revenue of about €1.89bn ($2.27bn) in Q4, an increase of 5% compared to the €1.79bn made in the previous quarter, and a 15% rise year-on-year. Ad-supported revenue exceeded €280m in Q4, a 52% jump from the €185m generated in Q3 and a 29% increase year-on-year.
The company says the growth in Premium subscriptions was driven by all regions, with Europe and North America being the highest contributors. Europe accounted for 40% of Spotify’s Premium subscriber base in Q4, followed by North America (29%), Latin America (21%) and the rest of world (11%).
“Europe continues to benefit from our July launch in Russia and 12 surrounding markets,” Spotify said. “Latin America and Europe performed particularly well from a regional perspective, while Family Plan and Duo additions were strong from a product perspective.”
Other Premium growth drivers include the launch of Premium Mini in India and Indonesia in Q4 and partnership deals with Grab (Southeast Asia), Flipkart (India), Tink (Germany) and Euronics (Europe).
Spotify also bolstered its investment in podcasts in the quarter. The platform now has 2.2 million podcasts, up from about 1.9m podcasts in Q3. There’s also a slight increase in podcast activity. About 25% of its MAUs engaged with podcast content in Q4, an increase of 22% in the previous quarter.
Spotify’s target for the first quarter of 2021 includes total Premium subscribers of between 155 and 158 million, total MAUs of between 354 and 364 million and revenue of €1.99bn to €2.19bn.
“We ended 2020 with a strong Q4 performance as the business delivered substantial MAU growth, subscriber additions that exceeded our guidance, an improvement in ARPU [average revenue per user] trends, acceleration of users who engage with podcast content, better than expected gross margin, and free cash flow of €74m. In 2020, we believe the pandemic had little impact on our subscriber growth and may have actually contributed positively to pulling forward new signups,” Spotify said.
“From a revenue standpoint, advertising was negatively affected in the back half of Q1 and persisted throughout the rest of the year. Looking ahead, we are optimistic about the underlying trends in the business into 2021 and beyond. However, we face increased forecasting uncertainty versus prior years due to the unknown duration of the pandemic and its ongoing effect on user, subscriber and revenue growth.”
Meanwhile, reports indicate that Spotify shares dropped about 8% following disappointing financials and future outlook. The company’s stock was trading at about $317 per share on Wednesday from the closing price of $345 a day earlier.