A staggering 3 p.c of the world’s inhabitants now subscribes to Spotify. However the Stockholm-based streaming big isn’t glad. Apart from revamping its struggling promoting enterprise and enhancing its music choices with A.I. options, Spotify is betting that non-music content material—like podcast movies and audiobooks—will assist drive additional development.
The corporate’s shares fell greater than 11 p.c at the moment (July 29) after it missed Wall Road’s expectations for its second-quarter earnings. Spotify reported $4.85 billion (4.2 billion euros) in income, up 10 p.c from a 12 months in the past, although development was hindered by unfavorable foreign money change charges. It additionally posted a web lack of $99.25 million (86 million euros) for the quarter, a pointy reversal from its $316 million (274 million euros) revenue throughout the identical interval final 12 months, citing elevated prices tied to personnel, skilled companies, and advertising and marketing.
Promoting income failed to supply a lift, dipping 1 p.c year-over-year. “We’ve merely been transferring too slowly, and it’s taking longer than anticipated to see the enhancements we initiated to take maintain,” stated CEO Daniel Ek, attributing the promoting struggles to execution points quite than flaws within the firm’s broader technique.
Spotify confirmed that the current departure of Lee Brown, its former head of promoting—who this week joined Doordash as chief income officer—was a part of this govt shake-up. “We felt it was the correct time for management change,” Ek informed analysts, including that Spotify must “speed up the transformation of this enterprise.”
Nonetheless, hovering demand for streaming companies continues to gasoline development elsewhere. Premium subscription income rose 12 p.c within the quarter, with Spotify reaching 276 million subscribers and 696 million month-to-month energetic customers—up from 246 million and 646 million, respectively, in 2024.
Spotify’s new A.I.-powered options are additionally proving standard. In Could, the corporate launched Spotify DJ, a personalised A.I. assistant that provides music solutions and takes consumer requests. Engagement with the characteristic has almost doubled over the previous 12 months, due to enhancements in how the expertise interprets consumer prompts. For instance, a question like “that music the place Bruce Springsteen invitations up that fan onstage within the music video” will now appropriately cue up Dancing within the Darkish, stated Gustav Söderström, Spotify’s chief product and expertise officer, throughout at the moment’s earnings name.
Can Spotify discover success exterior of music?
Regardless of its dominance in music streaming, Spotify is doubling down on non-music content material to drive future development. “With video and books added on prime of this, it simply expands the chance even additional,” stated Alex Norström, Spotify’s chief enterprise officer, throughout the earnings name.
Video consumption on the platform is now rising 20 instances quicker than audio, stated Norström, who famous that 350 million customers have watched video on the platform.
Audiobooks are one other main focus. Greater than 350,000 titles at the moment are obtainable to eligible subscribers. Throughout the previous quarter, Spotify expanded its audiobook service to 4 further international locations. It additionally launched Audiobooks+, a brand new subscription add-on that offers customers further listening hours every month.
Norström stated these investments are vital to Spotify’s ambition to broaden its world footprint. “It’s not implausible to think about us reaching 10 [percent], and even 15 p.c of the world’s inhabitants,” he stated.
Although finest identified for audio streaming, Spotify says its broader content material technique has at all times been pushed by consumer habits. Its audiobook efforts started after it seen that customers had been importing books to the platform themselves. Equally, the corporate’s transfer into video adopted an increase in demand for video podcasts. “What Spotify has at all times achieved is we’ve simply adopted our customers round,” stated Söderström.
