Spotify is expected to report this week a significant slowdown in the number of new subscribers in the first quarter, the latest winner from the pandemic indicating that the blocking entertainment boom is over.
When the streaming audio company updates investors on Wednesday, it is not expected to maintain the soaring rate of new subscriber growth experienced last year. Spotify, which reported 6 million new subscribers in the first three months of last year and 11 million in its most recent quarter through the end of December, has warned investors not to expect the boom to continue at that rate.
In total, Spotify added 31 million new paying subscribers last year as the boredom of the coronavirus lockdown fueled a boom in listening to music and podcasts from Michelle Obama and Kim Kardashian to the Duke and Duchess of Sussex. It brought the number of paying customers to 155 million and its total monthly user base, including those on its ad-free tier, to 345 million.
However, in February, Spotify predicted that at best it would add 29 million new paid subscribers this year, while at worst it expected 17 million, almost half of last year’s total. The news shook investors, who sold shares and Spotify’s shares fell 8% even though the company beat Wall Street’s expectations for the growth rate of subscribers and advertising last year. Spotify has forecast an expected operating loss of € 200 million to € 300 million this year.
Last week, Netflix reported a dramatic slowdown in subscribers in the first three months of 2021, ending a record streak of growth during the Covid-19 pandemic and echoing the expected trend in Spotify figures on Wednesday.
Despite the expected cooling of growth, Spotify continues to experience a significant increase from the pandemic, the company’s share price has doubled over the past year, giving it a market valuation of more than $ 50 billion ( £ 36 billion).
Spotify has spent nearly $ 1 billion to diversify beyond its core podcasting music offering, acquiring industry companies and landing key talent deals.
Daniel Ek, Founder and CEO of Spotify, has said the strategy has worked, making it more attractive to new customers as listening to podcasts has doubled and provided a new source of advertising revenue.
This success has not gone unnoticed by Apple, which effectively started the podcast 16 years ago, but has given ground to Spotify. Last week, the Silicon Valley company announced the launch of subscriptions to the Apple Podcast, which offers users new content and listening without advertising, in 170 regions.
“Apple has squandered its leadership on podcasting a bit,” said Matt Deegan, creative director at radio and new media consultancy Folder Media. “They’ve finally caught on to the fact that Spotify is about to have lunch in the podcasting industry if they don’t innovate. This is Apple’s counterattack. “
Since its podcasting adventure in 2019, Spotify’s acquisitions include $ 340 million to buy the Gimlet and Anchor networks, and $ 235 million to buy Megaphone, which offers ad technology for podcasts. Spotify has also spent millions on exclusive offers for talents.
“Apple’s podcasting subscription service is clearly both an offensive and defensive move against Spotify,” said Dan Ives, an analyst at Wedbush. “Ultimately, we expect more exclusive content partnerships to be announced in the coming months to compete with Spotify in this rapidly changing podcast arms race.”
George is Digismak’s reported cum editor with 13 years of experience in Journalism