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Why Spotify Stock Surged 4.4% despite Widening Losses

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Spotify’s paid subscribers grew 40% YoY

Spotify (SPOT) reported a spectacular subscriber growth in the second quarter. It now has 83 million paid subscribers, which represents a 40% growth from Q2 2017. It added 8 million paid subscribers in the second quarter. As we saw in the previous part, it depends heavily on paid subscribers.

The company reported 180 million MAU (monthly active users), which included 101 million of them using the ad-supported version. That means that 4 million paid subscribers don’t use the service on a monthly basis. The company said its promotional activities drove paid subscriber growth in the second quarter.

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Spotify’s family plan helped retain paid subscribers

Spotify’s family plan, which costs $14.99 per month in the United States, allows five users under the same subscription. The family plan was an important driver of gross subscriber additions in the second quarter. The family plan also keeps the churn rate lower. According to Spotify, the family plan has a generally high retention rate.

Spotify predicts that its paid subscriber growth will slow down in the third quarter. It expects to add 2 million–5 million subscribers in the current quarter.

Spotify’s average revenue per user fell 12% YoY in the second quarter to 4.89 euros. That was the result of promotions such as bundling its service with video streaming service Hulu.

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