Spotify met its business expectation on all major parameters despite the COVID-19 outbreak. Both the MAUs and premium subscribers grew 31% YoY to reach 286 million and 130 million respectively. This is driven by strong regional performances in Latin America and Asia Pacific. MAUs grew 36% YoY in Latin America while it grew 65% YoY in the Rest of the World (the Asia Pacific and Middle East Africa ) due to the good performance of Mexico, Brazil, and India.
Impact of COVID-19
The only metric which did not perform in line with the guidance is ad-supported revenues. This is because the pandemic has curtailed many advertisers budgets and have withdrawn ads from the platform. However, this revenue accounts for only 10% of Spotify’s overall revenue so this is not making a big dent in Spotify’s revenues. On the other hand, premium revenue grew 23% YoY and 4% sequentially in Q1 2019. Interestingly, this indicates that the growth in premium subscribers is not just because of free trials given by the company, but that people are willingly paying to subscribe to the service.
Amid the COVID-19 outbreak, on the global level, there is hardly any impact on paid subscribers and MAUs. In fact, both new and reactivated MAUs grew during lockdown periods in markets including North America, Latin America, and Asia Pacific, etc. Notably, for the quarterly average, the ratio of daily active users (DAUs) to monthly active users (MAUs) was higher than Q1 2019.
Beginning late February, Spotify saw the negative effects of the outbreak as there was a notable decline in DAUs and consumption in highly affected Spain and Italy. However, the market has started to rebound in these markets over the last week of March.
As people continue to stay at home, the usage in cars, wearables, and web platforms has dropped, however this gap is filled with increased traction on smart TVs and gaming consoles which is up by over 50%.
There is a shift in pattern from listening while commuting to listening at home. Podcasts related to wellness and meditation have seen an uptick. The freemium model of Spotify has turned out to be successful in the pandemic time compared to the premium model of Apple Music and Amazon Music. Apple is well aware of this fact and this is one of the reasons it has given 6 months free trials to people in 52 new markets that it recently entered.
Podcast in focus
Spotify is moving from a music first to an audio first company, as podcasts have been gaining user engagement for over a year now. The company has clear plans to keep investing in podcasts with an aim to ace the exclusive content category. It acquired The Ringer in Q1 2020 giving it a total of four studio operations.
Outlook
Entering India has been a good move for Spotify. There is still a lot of scope for it to shine in the Indian market due to cheap 4G data and around half a billion smartphones capable of installing the app. Also in 2020, Spotify will focus on increasing its share in other countries. In the webcast, Spotify made it clear that it sees Russia and South Korea as having good potential. There it will be competing with regional giants like Yandex Music in Russia and Melon in South Korea.
