Spotify added more new subscribers than forecast in the first three months of the year, as more users turned to the streaming service for “chill” and “instrumental” music to help them through coronavirus lockdowns across the world.
Daniel Ek, chief executive, told the Financial Times on Wednesday that the music streaming company considered its prospects amid the pandemic to be “very good”, as user growth accelerated compared with a year ago. He expects demand to hold up despite rising unemployment in the US and elsewhere, noting that Spotify has a free service that people can downgrade to if they need to reduce spending.
Mr Ek said that Spotify was on the hunt for “advantageous” podcast acquisitions, after agreeing to pay nearly $200m to buy The Ringer, the sports-focused digital media group, this year. “Certainly if there is a worse environment you may see better deals than a quarter ago,” he added. “We’re going to be opportunistic.”
The dominant music streaming company added 6m subscribers in the first quarter to reach 130m paying customers, ahead of the 129m Wall Street analysts predicted and up roughly a third from last year.
Spotify shares climbed more than 8 per cent in pre-market trade in New York. The company’s stock has fared better than the broader market, dropping 5 per cent this year, compared with an 11 per cent fall in the S&P 500.
While Netflix has been boosted by lockdowns that kept people at home, the coronavirus effect on music streaming has been less clear. Some analysts expected that fewer people commuting to work might mean less time spent using Spotify.
Spotify on Wednesday confirmed that music listening had changed during the virus crisis. “Morning routines have changed significantly,” the company said in it first-quarter update. “Every day now looks like the weekend.”
However, despite some “notable” declines in daily use in Italy and Spain in late February, Spotify said there was little overall impact to its subscriber and user numbers, and that music consumption had mostly recovered by the end of March.
Total users, including those who do not pay for Spotify, rose to 286m, just below Wall Street forecasts of 287m.
Spotify runs advertisements on its free service, which was hit by the industry-wide slump in advertising. The company said that its advertising revenues during the final three weeks of March were more than 20 per cent lower than it had forecast.
However, advertising makes up only about a tenth of Spotify’s total revenues. “We are fortunate that as a business we are able to operate with very little disruption,” it said.
The company, which hands out most of its revenues to royalty payments to the music industry, reported an operating loss of €17m in the quarter on €1.85bn in revenues.