Spotify released its first-quarter report of 2020 to shareholders today that dives into how COVID-19 has affected listening habits, overall consumption and projected revenue for the remainder of the year.
While it was largely assumed that music streaming would remain steady or perhaps even grow thanks to social distancing, recent studies from late March proved otherwise. According to a report by Quartz, Italy saw a 23 percent decline in streaming of Spotify’s Top 200 songs from March 3rd to March 17th. Another report from Alpha Data revealed that on-demand streams in the US dropped 7.3 percent to 16.6 BILLION from March 13th to March 19th, while streams overall dropped 7.6 percent.
Over a month later, Spotify’s new report tells a different story that promises hope for the future of streaming. However, the streaming service notes it could lose $400 MILLION in revenue if current projections hold true. Continue below for six key insights into their latest shareholder report:
Yes, Consumption Went Down Due To COVID-19 (But It’s Coming Back)
Spotify reports they saw an impact on consumption beginning in late February amid COVID-19. Italy and Spain were “hard hit markets” that experienced a notable decline in daily active users and consumption, according to the report, but listening has started to rebound over the past few weeks. Monthly active users, on the other hand, continued to grow during this period.
“Every Day Looks Like The Weekend”
Streaming habits have changed dramatically over the past month as listening around such activities “cooking, doing chores, family time, and relaxing at home” have gone up double digits. Notably, Spotify reports a rise in searches for “chill” and “instrumental” music, while two in five consumers surveyed reported they were listening to music to manage stress more than they used to.
Podcast consumption habits experienced the biggest change due to less time on the road. Spotify also reports a growth in consumption of podcasts related to wellness and meditation.
COVID-19 Caused A Modest Decline In Premium Subscribers
There was a “modest” increase in cancellations and payment failures thanks to COVID-19 at the very end of the first quarter, Spotify reports. However, the service says this had “little impact” overall as trends continue to steadily improve. An exit survey revealed one in six respondents cancelled due to COVID-19, while 80 percent indicated they are “extremely likely” or “likely” to renew their accounts once the economic situation improves.
Ad-Supported Revenue Took A Hit From COVID-19
Ad-supported revenue grew 17 percent year-to-year, but this wasn’t enough to meet Spotify’s projections for the quarter. The service blames this loss on COVID-19, particularly the last three weeks of the quarter, as there was a deceleration “across all sales channels” in March when businesses were put on pause. During these three weeks, ad-supported revenue was 20 percent below forecasted levels.
New Hires Will Slow Down
Spotify announced they will slow the pace of new hiring for the remainder of 2020 until the company has a better understanding of COVID-19’s economic impact:
“We will continue to focus our investments in areas of strategic importance, and remain committed to our longterm targets for hiring in Research & Development. Additionally, we are committed to retaining all existing employees, but are mindful about the absolute level of hiring until we have more clarity on the global economic picture and the length of our work from home status. At the end of Q1, our workforce consisted of 5,779 FTEs globally.”
Spotify will continue to grow across monthly active users (MAUs) and premium subscribers despite the COVID-19 pandemic, but revenue projections are down by over $400 MILLION:
Total MAUS: 328-348M
Total Premium Subscribers: 143-153M
Total Revenue: Reduced to 7.65-8.05 BILLION from 8.08-8.48 BILLION
- Note: “The two biggest drivers of the reduction in revenue guidance relate to changes in foreign exchange rates and changes in our advertising expectations related to COVID-19. F/X is the largest impact accounting for almost half of the change”
Read Spotify’s full shareholder report here.