Spotify Earnings

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.

QuarterPremium Gross Margin Ad-Supported Gross Margin
Q1 201714.00%-18.00%
Q2 201724.10%13.60%
Q3 201722.90%17.00%
Q4 201726.76%21.35%
Q1 201826.00%12.70%
Q2 201826.90%16.30%
Q3 201826.10%18.60%
Q4 201827.30%22.10%
Q1 201925.90%11.10%
Q2 201927.20%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.

QuarterAverage Revenue Per User
Q1 20175.46
Q2 20175.69
Q3 20175.50
Q4 20175.69
Q1 20184.72
Q2 20184.89
Q3 20184.73
Q4 20184.89
Q1 20194.71
Q2 20194.86

Disclaimer: I have Spotify stocks in my personal portfolio

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