SPOTIFY REGISTERS FIRST PROFIT AS SUBS HIT 96M

Spotify’s total monthly active users topped 200m in the fourth quarter of 2018 with 96m of them as premium subscribers, the company announced in its Q4 results.

Year to year, the MAUs were up 29% to 207m while the premium subscriber rolls spiked 24%.

The growth delivered something Spotify had never experienced: A quarterly profit. The company was $107m in the black for the quarter that ended 12/31. The company attributed it to strong gross margin and slower than planned headcount growth.

For the full year, Spotify’s losses were under $50m, a dramatic improvement from 2017 when they topped $400m.

In 2019, the company is predicting that the number of MAUs could hit 265m; Premium Subscribers will be in the 117m-127m; total revenue will be up 21%-29% to $7.2b and $7.75b; and operating profit could be as high as $410m.

Spotify also announced that it had acquired two podcast companies, Gimlet Media and Anchor. CEO Daniel Ek described, in a blog post, podcasting as the future for the company, which plans to spend up to $500m this year on more podcasting acquisitions.

“The format is really evolving and while podcasting is still a relatively small business today, I see incredible growth potential for the space and for Spotify in particular,” he wrote, noting that Spotify has become the second-biggest podcasting platform."

“Based on radio industry data, we believe it is a safe assumption that, over time, more than 20% of all Spotify listening will be non-music content. This means the potential to grow much faster with more original programming — and to differentiate Spotify by playing to what makes us unique — all with the goal of becoming the world’s number one audio platform.”

Gimlet is a leading content creator; Anchor, he writes, “has completely reimagined the path to audio creation, enabling creation for the next generation of podcasters worldwide — 15 billion hours of content on the platform during Q4.”

“To be clear, this doesn’t make music any less important at Spotify,” he writes. “Our core business is performing very well. But as we expand deeper into audio, especially with original content, we will scale our entire business, creating leverage in the model through subscriptions and ads.

“Ultimately, if we are successful, we will begin competing more broadly for time against all forms of entertainment and informational services, and not just music streaming services. We welcome this. Fair competition on an even playing field is what yields the most creative output and innovation, and will result in the best experience for listeners and creators.”

The company is now in 78 countries, up from 65 with Europe accounting for 36% of the MAUs and 40% of the premium subscribers. North America accounts for 30% of both.

The company’s stock was down more than 8% in pre-market trading, selling for $130.57.