If there were doubts that Spotify’s aggressive push for profitability would prove fruitful, those had to have been quashed on seeing the streamer’s Q2 2024 results. Seven million new paid subscribers were added for the quarter, despite the second price hike in a year.
This brings Spotify’s subscriber total to 246 million – up 12% from the same period in 2023. This growth exceeds analysts’ predictions by one million subscribers, despite the second subscription price hike within a year. The company reported in its earnings statement that while its active user base reached 626 million, it fell slightly short of the anticipated 631 million.
The Swedish company also reported a significant turnaround in its financial performance, posting an operating profit of €266 million ($289 million) for the quarter, a sharp contrast to the loss of €247 million it faced in the same period last year.
Besides subscribers, profitability improvement is attributed to reduced marketing and personnel expenses. Last year Spotify laid off around 17% of its staff across various departments, especially in podcasting. The streamer most recently cut 40 employees globally as it shifts focus to programmatic advertising for small- and medium-sized businesses. This reduction affects about 0.5% of its total workforce and 2.7% of its ad sales team.
Spotify justified its latest price hike on its audiobook offering for Premium subscribers, saying it has paid significant royalties to audiobook publishers since February, despite concerns from authors.
The audiobook situation also has the audio company in hot water with the music industry. By leveraging a royalty rate loophole, Spotify is trying to save up to $150 million by classifying its service as a “bundled subscription offering” due to the inclusion of audiobooks, shifting from a “standalone portable subscription.” This maneuver, based on the royalty rate formula in Phonorecords IV, has drawn criticism, with the National Music Publishers Association labeling it as, “cynical and potentially unlawful.”
In a statement, Spotify CEO Daniel Ek commented, “It’s an exciting time at Spotify. We keep on innovating and showing that we aren’t just a great product, but increasingly also a great business. We are doing so on a timeline that has exceeded even our own expectations. This all bodes very well for the future.”
