Spotify hits 108M paying users and 232M overall, but its average revenue per user declines

Spotify added 8 million subscribers in the quarter that ended in June, only slightly less than 8.5 million analysts had estimated, the streaming giant reported today.

The top music streamer said it had amassed 232 million monthly active users and 108 million paying subscribers at the end of June, up from 217 million users and 100 million subscribers in the quarter that ended in March. Monthly active users include paying subscribers and non-paying users.

“We missed on subs… That’s on us,” the company said.

Paying subscribers count includes users who are trying the 30-day trial Spotify offers. Additionally, Spotify recently kickstarted a biannual campaign, which offered customers access to the premium service for $1. This, among other factors, pushed its average revenue per user for the premium business to fall under 1%, the company said, adding that it expects the decline to continue in the low single digits for the rest of the year.

In comparison, Apple Music had 60 million paying subscribers as of June this year. (This also includes users who are part of Apple Music’s three-month free trial.)

On the business side, Spotify said its quarterly revenue rose 31% to $1.86 billion, while operating expenses increased 4%. Its operating loss narrowed to $3.34 million, the company said — better than estimations of analysts who expected Spotify to lose about $62 million on sales of $1.83 billion.

Additionally, Spotify revealed that it has reached an agreement with two of four major record labels for licenses and is in active talks with the other two. It did not identify the labels.

Spotify’s future profits will depend on how its existing margins change with the music labels. Bulk of the revenue Spotify generates, it has to pay them to music labels. Every few years, the company has to renew its agreements with them.

The music streaming service, which has ramped up its podcast offerings with the acquisition of Gimlet Media, Anchor and Parcast, said its podcast audience is up 50% since the last quarter. Barry McCarthy, CFO of Spotify, said the company is still open to acquiring more podcasting businesses.

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