The COVID-19 pandemic’s continued affect on Spotify’s enterprise was obvious within the outcomes of the corporate’s Q2 2020 earnings as we speak. On some fronts, Spotify had excellent news. As extra customers turned to streaming providers to maintain themselves entertained whereas social distancing, Spotify grew its lively month-to-month customers by 29% to succeed in 299 million within the quarter. Its paid subscriber progress additionally topped Wall St. expectations with 138 million paid customers, versus estimates of 136.four million. However, the pandemic took a destructive toll on Spotify’s promoting enterprise, with advert income down 21% year-over-year to €131 million in Q2.
Spotify’s Premium subscriptions, which nonetheless account for almost all (~90%) of its revenues, grew by 17% to succeed in €1.76 billion within the quarter. The firm attributed this progress to a spread of things, together with progress in dearer Family Plan subscriptions and its new Duo choice for 2 customers, in addition to the growth of these plans to new markets, like Russia.
Meanwhile, the corporate touted that customers’ listening hours are additionally now returning to ranges close to what they have been earlier than the COVID-19 well being disaster.
In the primary quarter, the pandemic had initially led to declines in day by day lively customers and listening hours as customers coped with their sudden way of life modifications,. like working from house and homeschooling kids. Spotify as we speak stated that as of June 30, world consumption hours have since recovered to “pre-COVID ranges” in all markets besides Latin America, which continues to be round 6% under peak ranges previous to the worldwide well being disaster.
This restoration in listening hours was led by these areas the place the COVID-19 unfold is slowing, together with the E.U. and Asia-Pacific areas, the corporate famous. Spotify can also be now seeing progress in different areas the place listening had slowed as a result of authorities lockdowns and the work-from-home shift, like in-car listening. This is now lower than 10% under pre-COVID ranges, up from a 50% decline at its lowest level in April.
On the draw back, Spotify’s advert income suffered within the quarter as a result of an general extra conservative market than earlier than the COVID disaster — a development the corporate expects to proceed all year long. This drove Spotify to overlook on income expectations within the quarter. The firm reported income progress of 13% to 1.89 billion euros, however this fell wanting analyst estimates of 1.93 billion.
“Last quarter we famous a marked deceleration in gross sales introduced on by the worldwide well being disaster the place the final three weeks in March have been down greater than 20% relative to our forecast,” the corporate stated in its shareholder letter. “Performance continued to lag our expectations by April and May, however we considerably outperformed expectations within the month of June. [Quarter to date] by May, ad-supported revenues have been down 25% year-over-year, however efficiency within the month of June confirmed important enchancment and was solely down 12% year-over yr.”
Though promoting isn’t a predominant income driver presently, it’s nonetheless a key a part of Spotify’s technique with regard to its podcasting enterprise. The firm is investing closely in bringing in new and unique offers, together with not too long ago Kim Kardashian West, Joe Rogan, Michelle Obama, DC & Warner Bros., TikTok star Addison Rae, and others. And it’s keen to spend — Joe Rogan’s deal reportedly value the corporate greater than $100 million, as an example.
It’s additionally promoting its personal podcast advertisements and constructing out different instruments for podcast creation, modifying, and distribution as a part of its funding on this house. For occasion, Spotify is growing new advert expertise geared toward higher monetizing podcasts, like its newest take a look at of in-app provides, which can permit customers to view and use coupon codes and different provides made in audio advertisements at any time from the Spotify app.
More not too long ago, the corporate invested in video podcasts as nicely. Spotify additionally says its Streaming Ad Insertion expertise may even grow to be extra broadly accessible to U.S. advertisers this summer time and introduced a $20 million advert partnership with Omnicom Media Group, which Spotify claims is the most important, world, strategic podcast advert partnership up to now.
Overall, Spotify stated its podcasting promoting outperformed within the quarter and is continuous into July.