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    Home»Sections»Broadcasting and Media»Spotify drops as growth in premium subscribers disappoints

    Spotify drops as growth in premium subscribers disappoints

    Broadcasting and Media By Agency Staff31 July 2019
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    Spotify shares fell as much as 5.1% in pre-market trading on Wednesday after the music streaming company reported slightly slower subscriber growth than investors had hoped.

    The company ended the most recent quarter with 108 million subscribers to its premium service, a shade below the 108.5 million forecast by analysts and below the mid-line of Spotify’s internal forecast.

    “We missed on subs. That’s on us,” CEO Daniel Ek said on a conference call. He said the shortfall was related to execution, and the streaming giant plans to make up the lost ground by year-end. Ek noted that Spotify came in at the higher end of forecasts except for that one number.

    There are times when investors are looking south instead of north and miss the forest through the trees

    Investors have high expectations for Spotify, the world’s largest paid online music service, and have sent shares down after almost all of its earnings reports as a public company. “This company is owned for subscriber beats and while management is likely to sound positive on the call, the subscriber miss is unlikely to be forgiven,” Lynx Equity Strategies analyst Jahanara Nissar wrote in a note.

    Barry McCarthy, Spotify’s chief financial officer, at first dismissed the brief downturn before saying investors may have expected a higher number. The company’s shares are up 37% this year.

    “There could have been a baked-in whisper number we don’t know about,” McCarthy said. “There are times when investors are looking south instead of north and miss the forest through the trees.”

    Free tier

    Spotify’s overall user base grew to 232 million, above Wall Street projections of about 227 million and the company’s guidance for a range of 222 million to 228 million. The majority of those people use the free, advertising-supported version of the service.

    The company also said it has reached agreement with two of four major record labels regarding licenses. Getting to long-term profitability from the current losses will hinge in a big way on the new royalty arrangements the company is negotiating with major music labels. Spotify restructured the deals such that it can create new tools and services — new sources of revenue — that are free from labels’ guaranteed cut of sales. McCarthy described it as an important win.  — Reported by Lucas Shaw, with assistance from Kamaron Leach, (c) 2019 Bloomberg LP

    Daniel Ek Spotify
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