Spotify now has 515 million monthly active users (MAUs), representing a 5% increase on the previous quarter and 22% increase on the corresponding period last year.
This is the first time Spotify has claimed a user base in excess of half-a-billion users, with 210 million premium subscribers and 317 million on the ad-supported plan. However, it represents a ratio of 40% paid-to-free listeners, a ratio that seems to be in free-fall.
For comparison, Spotify’s premium subscribers constituted 46% of its overall user base in Q1 2019, falling to 45% in Q1 2020, 44% in Q1 2021 and 43% in Q1 last year, before dropping to just under 42% for the previous quarter.
A two-percentage point drop in the premium-to-free listeners ratio from quarter-to-quarter seems significant. It’s not clear how many premium subscribers may be switching to the free ad-supported tier, but it is clear that Spotify’s ad-supported user base is outpacing its premium subscribers, quite possibly due to consumer cost-cutting due to the economic downturn.
This isn’t translating into ad-supported revenues, however. Spotify’s figures show that while its income from advertising grew 17% year-on-year, it actually fell by 27% on the previous quarter, with its total revenue dropping by 4% (though it increased by 14% on a year-on-year basis).
The company acknowledged that its revenue growth fell below expectations due to “macro-related variability in our advertising business.”
However, Spotify is keen to stress that its MAUs grew by 26 million users overall versus a guidance of 15 million, making it the company’s single-biggest Q1 net growth and second largest quarterly growth in its history. Now, if only it could convert more of them to premium subscribers.
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Another notable takeaway from its Q1 2023 shareholder report relates to its operating losses. While its losses this time around were an improvement on the last quarter (€156 million versus €231 million on Q4 2022), the company is forecasting this trend to continue, with a projection of €129 million in operating losses for Q2 2023.
