Spotify is still adding customers at a fast pace, boosted by growth in Latin America, as it battles with Apple for command of music streaming across the globe.
Promotions helped Spotify add 8m paying subscribers in the three months to the end of June, the company reported in its second earnings filing since debuting on the stock market in April.
This was on the high end of Spotify’s guidance and met Wall Street’s expectations, lifting shares more than 1 per cent in early trading on Thursday.
Spotify’s stock has climbed 26 per cent since listing on the New York Stock Exchange, as investors express optimism about a budding recovery in the music business and a potentially huge pool of new customers in Asia, Europe and Latin America.
However in the US, where more people use iPhones, Apple has been catching up with Spotify — adding pressure on the company to find subscribers in new countries. Spotify confirmed on Thursday that growth in Latin America and the “rest of the world” had outpaced its “more established markets”.
Spotify reported 83m paid subscribers for the three months ending in June, up from 75m last quarter. Total monthly users jumped 30 per cent to 180m in the quarter.
Spotify pays the majority of its revenues back out in royalties to the big music companies and does not make a profit, opting instead to focus on adding subscribers. The company posted an operating loss of €90m on sales of €1.27bn, in line with analyst estimates.
One roadblock in its quest for growth outside its historic markets is that Spotify does not own its content, and must negotiate with the large record labels to license their music in new territories. The music labels have yet not given Spotify permission to launch in India, the Financial Times reported on Tuesday. Spotify has been bypassing the labels to license songs directly from artists in some cases, straining relations.
Addressing the Financial Times report on a call with analysts, Daniel Ek, chief executive, said that licensing negotiations were “always a complicated manoeuvre” and that he could not “accurately estimate” when Spotify would launch in India.
Wall Street has baked lofty expectations for this region into its forecasts for Spotify’s future growth. Morgan Stanley predicted the company would have 53m paid subscribers in Asia, the Middle East and Africa by 2023, from just 11m this year.
Mr Ek said he expected Spotify’s leadership in music streaming globally to continue, despite forecasts that Apple is set to surpass Spotify in US subscribers this year.
Spotify does not report its subscribers by country and Barry McCarthy, chief financial officer, declined to give a forecast for Spotify’s US growth this year, noting instead that the total market for streaming was “quite robust”.