Spotify Has No Plans to Be Music Label, Chief Says; GDPR Effects Downplayed
Spotify put to rest reports it's becoming a music label Thursday. Responding to questions on its Q2 earnings report, CEO Daniel Ek said the company doesn’t hold any rights to any music. The company finished Q2 with 180 million monthly average users (MAUs) and 83 million premium subscribers. Revenue rose 26 percent to 1.27 billion euros ($1.5 billion) vs. 1 billion euros in the year-ago quarter. The stock closed up 4.4 percent at $196.28.
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Responding to a question on MAUs being at the low end of guidance in Q2, Chief Financial Officer Barry McCarthy said the business from a revenue and margin perspective is performing at the high end of expectations. The EU’s general data protection regulation “was an issue for a couple of weeks,” but the company is past that “speed bump,” he said, assessing the revenue impact at “less than a million euros,” which he termed “quite small.”
Ek said the company is building a “two-sided marketplace” that provides tools and services for labels and artists focused on promotion and marketing. Spotify has always licensed music from rightsholders, and will continue to do so, with the goal of getting as much music as possible on the platform, he said.
On competition from Amazon, Ek said a key objective is to be ubiquitous on all platforms: mobile, car and home. It’s working with carmakers long term so users will be able to connect via Bluetooth with their mobile devices. He noted Spotify is part of Google’s Android Auto and Apple’s CarPlay. Spotify has no intention to enter video streaming, Ek said.
On whether the music streamer wants to offer more exclusive content along the lines of its $1 million podcast deal with comedian Amy Schumer, Ek said the company doesn’t believe in exclusivity on the music side but the podcast market works differently and there’s room for exclusivity and original content productions. Exclusive podcast content “is something you should expect us to test and experiment with,” he said.
After going public in April (see 1804020050), the company revised user metrics policies in Q2 to “better align with current practices of other consumer-facing internet companies,” it said. Its SEC registration statement in March, and in its Q1 earnings release, said the company excluded users “that may have employed methods to limit or otherwise avoid being served advertisements (although our financials captured all the costs of streaming content to these users),” the company said Thursday. MAUs reported didn’t reflect the complete number of users consuming content via Spotify, it said.
Expanding on future MAU growth, McCarthy said if the premium business grows faster than Spotify projects, it will have fewer free MAUs, creating a “headwind” for the ad-supported business. McCarthy said the overall business would be better in that case because it will bring more revenue and higher margins. The company expects that trend to continue.