Spotify reported some good results earlier today for their 2Q 2019
Important metrics all improved YoY, including user base and financial growth. Gross Margin for Premium and Ad-Supported is 27.2% and 15.8% respectively. Average Revenue Per User is 4.86 euros. Compared to the previous 2nd quarters, here is where the current one stands
Every metric’s growth, except that of Premium Subscribers and Total MAUs, slowed compared to a year ago.
In terms of Gross Margin, while that of Premium stays relatively stable, Ad-Supported’s fluctuates quarterly.
| Quarter | Premium Gross Margin | Ad-Supported Gross Margin |
| Q1 2017 | 14.00% | -18.00% |
| Q2 2017 | 24.10% | 13.60% |
| Q3 2017 | 22.90% | 17.00% |
| Q4 2017 | 26.76% | 21.35% |
| Q1 2018 | 26.00% | 12.70% |
| Q2 2018 | 26.90% | 16.30% |
| Q3 2018 | 26.10% | 18.60% |
| Q4 2018 | 27.30% | 22.10% |
| Q1 2019 | 25.90% | 11.10% |
| Q2 2019 | 27.20% | 15.80% |
Though Average Revenue Per User does fluctuate, this quarter’s is lower than that of the previous two 2Qs. I suspect that Spotify will pursue the Netflix’s playbook by growing their user base, whether it’s Premium or Free Trial. A large user base will help make each investment in content (podcast) relatively cheaper (a fixed cost is divided by a growing denominator). A sizable base will make Spotify more attractive as a partner to content producers and advertisers. Spotify differs from Netflix in a sense that they are already offering ads while the video streamer is still true to their focus on videos.
| Quarter | Average Revenue Per User |
| Q1 2017 | 5.46 |
| Q2 2017 | 5.69 |
| Q3 2017 | 5.50 |
| Q4 2017 | 5.69 |
| Q1 2018 | 4.72 |
| Q2 2018 | 4.89 |
| Q3 2018 | 4.73 |
| Q4 2018 | 4.89 |
| Q1 2019 | 4.71 |
| Q2 2019 | 4.86 |
Disclaimer: I have Spotify stocks in my personal portfolio
Minh Quang Duong 