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India, Indonesia drive Spotify's user growth in Q4 2021

Advertising, which has emerged as a key growth area for Spotify now accounts for about 15% of its overall revenue, as compared to about 13% a year ago.

February 03, 2022 / 08:30 PM IST

Music streaming service Spotify added 25 million monthly active users for the quarter ended December 31, 2021, taking its total base to 406 million users, benefiting from growth in markets such as India, Indonesia and Latin America.

In a letter to shareholders, Spotify said they saw double digit annual growth in its monthly active user base for the quarter, particularly in the "Rest of World region, which was led by strong results in India and Indonesia". The company, however, didn't disclose any further details on its user base in the country.

Paying subscribers grew by 16% year-on-year (YoY) to 180 million in Q4, led by strong promotional campaign performance. The service added 8 million subscribers during the quarter, with growth led by Europe and Latin America.

For the full year 2021, Spotify added 61 million monthly active users, of which 25 million users were paid members and the remaining 36 million users were ad-supported users.

Revenue from subscriptions, which accounts for a majority of its topline, grew by 22% YoY to €2.295 billion (approx $2.6 billion) for the quarter while revenue from advertising increased by 40% YoY to €394 million (approx $445 million).

Advertising, which has emerged as a key growth area for the firm now accounts for about 15% of its overall revenue, as compared to about 13% a year ago.

Future revenue mix

During the company's earnings conference call, Spotify CEO Daniel Ek said that several content platforms are likely going to have multiple revenue streams instead of a single revenue stream and it will ultimately be about the revenue mix.

"We started from the paid and we're obviously growing into having both advertising and paid. And there will be some other platforms that started with advertising and then start adding more paid content as well. So I think it's a combination of subscription, a la carte and advertising that long term will be the revenue mix" Ek said.

For advertising, the initial focus would be on monetizing the U.S. and U.K. markets, but they will eventually expand their advertising presence outside the United States. "It takes a little bit more time to monetize the international markets. I don't think we will be an exception to that. So long term, I think it will be more geographical" Ek said.

"I think that bodes well for regions such as India, Indonesia and others, where Spotify has had enormous success. But that's also how you should read into those investments. They may not be large from a revenue perspective today, but I'm absolutely confident that by investing in these markets and becoming the number one audio platform there, that's going to be a very worthwhile position to own in the long term" he said.

Joe Rogan controversy

These financial results come at a turbulent time for the Swedish music streaming service that is facing criticism over how it handles misinformation on its platform, particularly over its star podcaster Joe Rogan. Several musicians like Neil Young and Joni Mitchell have pulled their music catalog from the service.

During the earnings call, Ek called it as a very complicated issue and they are trying to "balance creative expression with the safety of their users"

"I think the important part here is that we don't change our policies based on one creator nor do we change it based on any media cycle or call from anyone else" he said.

Ek noted that Spotify's policies are written with the input from numbers of internal and external experts in this space and they believe these policies are right for their platform. "While Joe has a massive audience, he's the number one podcast in more than 90 markets, he also has to abide by those policies" he said.

Last week, Spotify had announced that they will add a content advisory to any podcast episode that includes a discussion about COVID-19. This advisory will direct listeners to the service's dedicated COVID-19 Hub, which Spotify says will provide users with easy access to "data-driven facts, up-to-date information as shared by scientists, physicians, academics and public health authorities around the world, as well as links to trusted sources"

"We will also begin testing ways to highlight our Platform Rules in our creator and publisher tools to raise awareness around what’s acceptable and help creators understand their accountability for the content they post on our platform" Ek said in an official blogpost.

During the earnings conference call, Ek said that they aim to eventually become the preferred destination for audio creators and hope to sign up more than 50 million active creators, a significant jump from the current base of 11 million creators.

"I think we've only scratched the surface of the creative potential in audio. We will provide tools and access to diverse revenue streams that can be personalized to meet the needs of each creator" Ek said.

ReadSpotify defends handling of Joe Rogan controversy amid uproar
Vikas SN
first published: Feb 3, 2022 08:29 pm