Spotify expected to report subscriber slowdown

Such an update would be another signal that Covid lockdown entertainment boom is over

Spotify is expected to report this week a significant slowdown in the number of new subscribers in the first quarter, the latest pandemic winner to signal that the lockdown entertainment boom is over.

When the audio streaming company updates investors on Wednesday, it is not expected to maintain the blistering rate of new subscriber growth experienced last year. Spotify, which reported 6 million new subscribers in the first three months last year and 11 million in its most recent quarter to the end of December, has told investors not to expect the boom to continue at such a pace.

In total, Spotify added 31 million new paying subscribers last year, as coronavirus lockdown boredom fuelled a boom in listening to music, and podcasts from Michelle Obama and Kim Kardashian to the Duke and Duchess of Sussex. It took the number of paying customers to 155 million, and its total monthly user base – including those on its free, advertising-supported tier – to 345 million.

However, in February, Spotify forecast that in a best-case scenario it would add 29 million new paying subscribers this year while at worst it expected 17m, almost half the total last year. The news rattled investors, who sold shares and sent Spotify’s shares down 8% despite the company beating Wall Street expectations on the growth rate of subscriber numbers and advertising for last year.

Spotify has forecast an operating loss of €200m to €300m this year, compared with an operating loss of €293m in 2020.

Last week, Netflix reported a dramatic slowdown in subscribers in the first three months of 2021, ending a record run of growth during the Covid-19 pandemic and echoing the trend expected in Spotify’s numbers on Wednesday.

Despite the expected cooling of growth, Spotify continues to experience a significant pandemic bump. The company’s share price has doubled over the past year, giving it a market valuation of more than $50bn (£36bn).

Spotify has spent almost $1bn diversifying beyond its core music offering into podcasting, acquiring companies in the sector and striking key talent deals.

Daniel Ek, the founder and chief executive of Spotify, has said that the strategy has worked, making it more attractive to new customers as podcasting listening has doubled and provided a new advertising revenue stream.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

This success has not gone unnoticed by Apple, which effectively started the podcast 16 years ago but has ceded ground to Spotify. Last week, the Silicon Valley company announced the launch of Apple Podcast subscriptions, offering users new content and ad-free listening, in 170 regions.

“Apple has somewhat squandered their lead in podcasting,” said Matt Deegan, the creative director at the radio and new media consultancy Folder Media. “They have finally woken up to the fact that Spotify is about to eat their lunch in the podcasting sector if they don’t innovate. This is Apple’s fightback.”

Since venturing into podcasting in 2019, Spotify’s acquisitions include $340m to buy the networks Gimlet and Anchor, and a reported $235m to buy Megaphone, which offers advertising technology for podcasts. Spotify has also spent millions on exclusive talent deals.

“Apple’s podcasting subscription service is clearly both an offensive and defensive move against Spotify,” said Dan Ives, an analyst at Wedbush. “Ultimately, we expect more exclusive content partnerships to be announced over the coming months to compete with Spotify in this quickly morphing podcasting arms race.”

Contributor

Mark Sweney

The GuardianTramp

Related Content

Article image
Spotify buys podcast firms Gimlet and Anchor
Streaming service reports first quarterly profits as it reveals plans to broaden beyond music

Mark Sweney

06, Feb, 2019 @4:17 PM

Article image
Podcasting's Netflix moment: the global battle for domination
With huge audience growth forecast, the race is on to lead podcast distribution

Mark Sweney

30, Mar, 2019 @8:00 AM

Article image
Spotify podcast deal could make Joe Rogan world's highest paid broadcaster
Streaming service must convince podcast listeners to switch from their favourite app

Alex Hern

24, May, 2020 @11:41 AM

Article image
Is Spotify really worth $20bn?
Music service will soon have its IPO and investors think it can be as big as Netflix. Are they right?

Alex Hern

02, Mar, 2018 @3:53 PM

Article image
Spotify beats expectations by reaching 83m subscribers
Music streaming service posts positive figures in face of competition from Apple and Amazon

Staff and agencies

26, Jul, 2018 @4:09 PM

Article image
Shaken it off! Taylor Swift ends Spotify spat
Singer ends three-year boycott of streaming service over royalties and makes entire back catalogue available to celebrate 10m sales of 1989 album

Mark Sweney

09, Jun, 2017 @4:21 PM

Article image
Spotify revenues surge 80% to more than £1.5bn
Music streaming service nevertheless recorded widening losses in 2015 due to heavy investment and fiercer competition

Julia Kollewe

24, May, 2016 @4:05 PM

Article image
UK lockdowns fuel record year for home entertainment spending
Netflix, Prime and Disney+ surge 38% to £2.9bn in 2020, with Frozen 2 the biggest selling video

Mark Sweney

08, Jan, 2021 @6:01 AM

Article image
Spotify: five big challenges looming for the streaming music service
Winning over artists, going mainstream, turning a profit, facing big-tech competition and (perhaps) going beyond music. By Stuart Dredge

Stuart Dredge

21, May, 2014 @12:50 PM

Article image
Joe Rogan hosts Alex Jones on Spotify podcast despite ban
Interview with conspiracy theorist leaves streaming service in awkward position

Jim Waterson Media editor

28, Oct, 2020 @5:53 PM