Spotify posts its first quarterly profit as paid subscriptions near 100m
Spotify has made its first ever quarterly profit, it said today, as it revealed results for the three months to the end of December.
The figures
The Stockholm-based firm posted an operating profit of €94m (£82.5m), as well as a 29 per cent rise in revenue in the fourth quarter thanks to an increased number of paid subscribers.
The streaming service posted revenue of €1.5bn in the three months to the end of December, up from €1.15bn the year before.
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Why it's interesting
Despite Spotify's huge brand recognition, the streaming service is more accustomed to posting losses than profit as it chases growth instead of earnings across its markets.
Its wild jump in earnings was driven by a rise in premium subscriptions, with 96m people now paying to use the service, an increase of 36 per cent year on year. While ad-supported revenue grew to €175m, the vast majority of the company's earnings come from paid users.
Katie Gilsenan, senior trends analyst at Global Web Index, said: “Spotify remains the leader among the major music streaming services outside of China, but key to its continued success will be maintaining its ad-supported tier, which has so far ensured that it boasts a larger reach than any competitor.”
“Results for the fourth quarter 2018 outperformed our expectations and, for the first time in company history, operating income, net income, and free cash flow were all positive,” the company said in a statement.
However, it predicts making another loss in 2019 of between €200m and €360m.
Nevertheless, Spotify's strong fourth quarter results came as it announced its purchase of two podcast companies in a bid to boost its position as a leading podcast platform.
Spotify today confirmed it will buy podcast networks Gimlet and Anchor, but did not reveal the value of the deals. The Gimlet deal is worth at least $200m, according to Recode, which first reported the move.
“Although there are some one-offs flattering the numbers this quarter, today still represents an important milestone,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
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“Spotify’s core business and geographies are looking increasingly comfortable, and while expansion into another 13 countries and development of advertising and artist tools is holding back the bottom line, it’s not a long term problem.”