Spotify stood tall on most expectations in the second quarter of 2018. However, its net loss doubled this year i.e. $458 million. This quarter ended with 10 million active users (7 million net adds) along with 83 million premium subscribers (up by 8 million sequentially) across the globe as reported by Variety.
The second quarter for Spotify mainly saw a 40% increase in subscriptions, which resulted in a 5.9 percent quarter-over-quarter growth rate. While the overall quarter 2 revenue was $1.49 billion which is up by 26% from the previous year, the net loss for the quarter doubled to $461 million in comparison to $188 million in quarter 2, in 2017.
In all, Spotify’s top line was up by 34% after adjusting the foreign exchange rates. Having said that, the subscriber revenue was $1.35 billion in quarter 2 which is up by 27%. The operating losses have grown by $10.50 million which gave Spotify an operating margin of -7.1%.
Despite the losses, Spotify is going to continue to invest aggressively in the music service which gave rise to the operating expenses by a 26% in quarter 2 which is in line with the overall revenue growth. Spotify also needs to watch out for Apple music since Apple music beat Spotify’s paying subscriber base in the U.S.
Perhaps what is more interesting apart from the net losses that Spotify made in quarter 2, is the talk about Spotify having an interest in becoming a music label. CEO and co-founder Daniel Ek also addressed reports about Spotify striking deals directly with artists while he was on the call on the earnings for quarter 2 with Variety. He clarified that this is how Spotify has always acquired content and added by saying – “Licensing content does not make us a label… We are not acting like a record label, nor do we have any interest in becoming a label,”. He also mentioned that Spotify’s licensing agreements with artists do not grant them exclusivity.
Let’s move on to Spotify’s forecast for the third quarter. The forecast for the total monthly active users is 188 million – 193 million. When it comes to premium subscribers the forecast is 85 million – 88 million. Last and most important, their projected revenue is €1.2 billion – €1.4 billion with an operating loss of €10 million – €90 million.
It is yet to be seen if, Spotify hits or misses their forecast for the third quarter. What do you think? Tell us below.
