(April 28): Spotify Technology SA, the music streaming leader, added slightly more users than analysts’ expected in the first quarter, showing it can still pull in new listeners even after it raised prices in its biggest market.
The Swedish company reported 761 million monthly active users, more than the 759 million Wall Street expected. Paying subscribers rose 9% to 293 million.
Spotify long ago shifted from a music-only destination to offer a broad spectrum of audio and video programming, including books, podcasts and most recently, a partnership with Peloton Interactive Inc to bring more than 1,000 workout classes to the service.
Gustav Söderström and Alex Norström, who took on joint leadership of the company in January, told Bloomberg News in an interview last year that their goal is to keep the platform valuable and inspiring to users. The co-chief executive officers believe people will want to continue subscribing to the service if they think their time on it is well spent.
The company is betting that people will find enough content they like to justify higher prices. Spotify raised the cost of premium subscriptions by 8% in the US in January to US$13 a month, amid pressure from analysts to bring its prices in line with other consumer platforms like Netflix Inc. The company has fiercely loyal listeners who have spent sometimes years building music and audio libraries, making them reluctant to cancel.
“Spotify keeps adding positive, meaningful and interactive engagement: more video, algo control, mixing tools and IRL moments,” Sean Diffley, an analyst at Morgan Stanely, wrote in a note before the results were released.
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Revenue gained 8% to €4.5 billion in the first quarter, the company said in a statement on Tuesday. Wall Street was expecting €4.53 billion, according to estimates compiled by Bloomberg.
The company gave second quarter guidance that included 778 million monthly active users and operating income of €630 million. That later is below analysts' forecasts.
As it turns 20 years old this month, Spotify is trying to ensure it stays relevant to how people consume music and other media. Once a pioneer in using machine learning to curate playlists, now Spotify is grappling with how to use artificial intelligence to its advantage rather than let the platform become overrun with so-called “AI slop.”
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Spotify is available on multiple artificial intelligence platforms, including ChatGPT and Claude, as well as on smart TVs. It’s testing allowing users to customise their recommendations by directing the algorithm to their own tastes and also prompting AI to create playlists for music and podcasts. The company also launched a feature called Page Match that lets people reading a physical book scan a page to begin listening to the audiobook from where they left off.
At the same time, while the company has cut staff and pulled back on the number of podcasts it distributes, its Good Hang podcast with Amy Poehler won a Golden Globe award this year and quickly became one of the top 50 most-popular podcasts in the US.
After a big run up in shares last year, Spotify’s stock has slid 15% this year. Wall Street has yet to be fully convinced that the company has a plan to defeat AI and it’s facing competitive pressure from big tech companies like YouTube, Amazon.com Inc and Meta Platforms Inc, where people also find distraction in music, books and podcasts.
Uploaded by Evelyn Chan
