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Spotify: Subscribers Stall While Profits Climb

This article is published in collaboration with Statista

by Florian Zandt

After two years of incurring net losses in six out of eight quarters, Spotify managed to get back into the black in the first three months of 2022 despite a decline in subscriber growth. The music streaming giant generated a net income of 139 million Euros against two million new subscribers, owed to a year-over-year revenue increase of 24 percent. Over the last five years, the streaming giant generated a positive net income in just six quarters, two of which were part of this past year. This marks only the third quarter in the past five years where the company's income came in above the 100 million Euro mark as our chart shows.

In Q4 of 2018 and Q3 of 2019, Spotify managed to generate a net income of 442 million euros and 241 million euros, respectively, making these two periods the most successful in recent company history. Even the comparably large jump in paid subscribers from 144 million to 155 million between October of 2020 and January of 2021, with one likely cause being the ongoing pandemic and stronger restrictions over the winter months, didn't help the company turn a profit.

Despite a comparatively dire outlook on the first quarter of 2022 in its forecast at the end of 2021, Spotify did manage to surpass its expectations when taking into account the war between Russia and Ukraine. On paper, it undershot its mark by one million paid subscribers, but this can be attributed to the loss of two million paid accounts in Russia following the suspension of the company's business activities as part of a larger wave of sanctions against the country. Due to the uncertain state of world affairs, Spotify dialed down its expectations for added paid subscribers to six million, which is still double the amount of paid subscriptions gained between Q1 and Q2 of 2021.

According to the shareholder letter accompanying its quarterly report, the company seems to put high hopes on its podcasting segment for future growth. As of March 31, the platform is home to around four million podcasts, and the growth of monthly active users engaging with podcast content allegedly outperforms the growth of monthly active users in general. To deliver a better service to its clientele of podcast publishers, the streaming giant also acquired advertising measurement service Podsights and analytics platform Chartable.

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