Spotify passes 500M customers, however its premium subscriber portion falls to 40%

Spotify now has 515 million month-to-month lively customers (MAUs), representing a 5% enhance on the earlier quarter and 22% enhance on the corresponding interval final yr.

That is the primary time Spotify has claimed a consumer base in extra of half-a-billion customers, with 210 million premium subscribers and 317 million on the ad-supported plan. Nevertheless, it represents a ratio of 40% paid-to-free listeners, a ratio that appears to be in free-fall.

For comparability, Spotify’s premium subscribers constituted 46% of its total consumer base in Q1 2019, falling to 45% in Q1 2020, 44% in Q1 2021 and 43% in Q1 last year, earlier than dropping to only beneath 42% for the earlier quarter.

A two-percentage level drop within the premium-to-free listeners ratio from quarter-to-quarter appears important. It’s not clear what number of premium subscribers could also be switching to the free ad-supported tier, however it’s clear that Spotify’s ad-supported consumer base is outpacing its premium subscribers, fairly presumably resulting from client cost-cutting as a result of financial downturn.

Spotify Q1 2023 earnings. Picture Credit: Spotify

This isn’t translating into ad-supported revenues, nonetheless. Spotify’s figures present that whereas its revenue from promoting grew 17% year-on-year, it really fell by 27% on the earlier quarter, with its whole income dropping by 4% (although it elevated by 14% on a year-on-year foundation).

The corporate acknowledged that its income progress fell under expectations resulting from “macro-related variability in our promoting enterprise.”

Nevertheless, Spotify is eager to emphasize that its MAUs grew by 26 million customers total versus a steerage of 15 million, making it the corporate’s single-biggest Q1 internet progress and second largest quarterly progress in its historical past. Now, if solely it may convert extra of them to premium subscribers.

One other notable takeaway from its Q1 2023 shareholder report pertains to its working losses. Whereas its losses this time round had been an enchancment on the final quarter (€156 million versus €231 million on This fall 2022), the corporate is forecasting this pattern to proceed, with a projection of €129 million in working losses for Q2 2023.