Spotify reported results for the first quarter of 2021 in line with expectations, with total revenue up 16% — helped by 46% uptick in ad sales. The streaming audio giant also said podcast listening hit an all-time high in Q1, calling out “The Joe Rogan Experience” as delivering better-than-expected performance.
Overall, the company said monthly active users grew 24% to 356 million, “modestly below our internal expectations,” as growth lagged in Latin America and Europe. Spotify Premium subscribers increased 21%, as the company added nearly 4 million net new members in Q1 to stand at 158 million.
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Spotify shares dropped 8% in premarket trading, as investors had hoped for a bigger bump in total users. For Q2 2021, Spotify is projecting 366 million-373 million overall monthly users and 162 million-166 million Premium subscribers.
For the first quarter, “Reported revenue was toward the top end of our guidance range due to subscriber outperformance, slightly lower headwinds from foreign exchange rates,” Spotify said.
Total revenue of €2.147 billion grew 16% in Q1, with ad revenue growing 46% year over year to €216 million (or 57% year over year in constant-currency terms). Spotify was essentially break-even for the quarter, with operating income of €14 million (versus a loss of €17 million in the year-earlier period) and net income coming in at €23 million (versus €1 million in Q1 2020).
For Q1 2021, the company had told Wall Street it expected total users of 354 million-364 million and paid subscribers of 155 million-158 million. Spotify had projected first-quarter revenue of €1.99 billion-€2.19 billion.
For the first three months of the year, Spotify reported “a strong increase” in podcast consumption hours compared with Q4. Podcast listening in March hit an all-time high in terms of podcast share of overall platform consumption hours, the company said (but didn’t share specific numbers).
According to the company, “The Joe Rogan Experience” — consistently its most popular podcast — performed above expectations with respect to new user additions and engagement. Rogan remains controversial, which for some is part of his appeal: His recent comments encouraging young people to not get COVID-19 vaccines, for example, has drawn fire from critics.
Notable Q1 podcast launches in the U.S. included “Renegades: Born in the USA,” from the Obamas’ Higher Ground, featuring former President Barack Obama and Bruce Springsteen. Spotify said “Renegades” was the second-largest podcast on the service in March (on a monthly active user basis) and “has been our most international show to date, with listenership extending across more than 150 countries.”
Overall, global consumption hours continued to grow meaningfully in Q1, with per-user consumption growing in more mature markets such as North America and Europe, while “developing regions showed signs of improvement but remained below pre-COVID levels,” the company said.
Total monthly active user growth in Q1 was led by markets including the U.S., Mexico, Russia and India, while growth was below expectations in Latin America and Europe. The 158 million Spotify Premium subs tallied in the quarter, at the top end of its previous guidance range, was “strong relative to a tough promotional comparison from Q1 last year,” the company noted. The company said average monthly Premium churn rate for Q1 was “down modestly” year over year and flat sequentially. Growth in paid subscribers was led by North America and Latin America; Spotify said among recent market launches, South Korea was the “biggest driver” of new customers.
At the end of Q1, Spotify had 2.6 million podcasts on the platform (up from more than 2.2 million podcasts at the end of 2020). The percentage of monthly users who engaged with podcast content was “consistent” with Q4, when about 25% of total users listened to podcasts.
This week, Spotify launched a new podcast-subscription program for creators — promising zero fees until 2023, when it will start taking a 5% cut of monthly subscriptions — in a challenge to Apple’s podcast subscription rollout. Spotify and Facebook also launched a Spotify “mini-player” that lets users listen to songs and podcasts directly in the Facebook app.
In announcing the Q1 results, Spotify also called out its acquisition last month of startup Betty Labs, creator of live-audio app Locker Room. That deal “builds on our work to create ‘future formats of audio’ and will accelerate Spotify’s entry into the live audio space,” the company said. “We plan to evolve and expand Locker Room into an enhanced live audio experience for a wider range of creators and fans. Through this new live experience, Spotify will offer a range of sports, music, and cultural programming, as well as a host of interactive features that will enable creators to connect with audiences in real time.”
Meanwhile, Spotify earlier this month announced a limited launch of Car Thing to eligible US users. Car Thing is a smart player that allows users to more seamlessly engage with Spotify music, news, entertainment, talk, and more in the car.