Spotify chief executive Daniel Ek said on February 4 that he is confident India and other emerging markets will become substantial businesses for the audio streaming service in the long term.
"What I am particularly pleased about in Q4 2024, or maybe even the back half of the year, is the development of emerging markets. We saw it pretty clearly in the MAU (monthly active users) topline growth. That's due to a lot of the tweaks that the teams have been doing that gets people in the funnel." Ek said during the company's earnings conference call.
"We're trying to increase engagement. I feel really good about some of the music things we're planning across the year that will drive even further engagement in those emerging markets" Ek said.
He mentioned that strong engagement always correlates with strong subscriber growth, citing Latin America as an example.
While its potential was initially questioned, Ek said everyone now realises that can be a "meaningful additive driver for both revenue and profitability for the company and the music industry"
That said, the near to mid-term growth and profitability will be driven by developed markets, he said.
Spotify's first year of full profitability
On February 4, Spotify reported its first full year of profitability since its launch in 2008. The streaming platform posted net profits of €1.14 billion (around $1.17 billion) for the entire year 2024, as compared to €532 million (around $549 million) loss in 2023.
This was driven by strong subscriber gains across various geographies, price hikes, and a range of cost-cutting initiatives. Spotify has also expanded its offerings beyond its core music streaming product to include audiobooks and video podcasts, which has helped in attracting more paid subscribers to the platform.
For the fourth quarter, Spotify posted an operating profit of €477 million, as compared to €75 million loss in the year-ago quarter.
Total revenue grew 16 percent year-on-year (YoY) to €4.2 billion for the quarter, from €3.7 billion revenue in the same quarter last year.
Spotify added 35 million MAUs in Q4 2024, bringing its total user base to 675 million for the quarter, a 12 percent increase YoY. The company stated this was its largest quarterly net addition in the fourth quarter.
The streaming platform added 11 million paid subscribers during the quarter, taking its total paid subscriber base to 263 million in Q2 2024, a 11 percent YoY.
The growth in Spotify's MAUs and paid subscriber base was led by strong holiday and the company's annual Spotify Wrapped marketing campaigns along with a shift in competitor dynamics in certain developing markets, the company said.
In India, Airtel shut down its music streaming service Wynk in August last year while Times Internet-owned Gaana was sold to Radio Mirchi parent firm Entertainment Network India Limited for Rs 25 lakh in December 2023.
Chinese technology giant Bytedance also shut down its music streaming service Resso in India in January 2024. Other players in the market include YouTube Music, Amazon Music, Apple Music, JioSaavn, and Hungama.
Subscription revenue vs ad revenue
Revenue from subscriptions, which account for the majority of the company's revenue, grew 17 percent YoY to €3.7 billion for the quarter, driven by subscriber growth and an increase in average revenue per user (ARPU) from premium subscribers.
Premium ARPU grew by 5 percent to €4.85, benefiting from price hikes, partially offset by product and market mix, the company said.
The company's advertising business grew 7 percent YoY to €537 million for the quarter. The music and podcast advertising growth was led by increase in impressions sold, partially offset by reduced pricing.
During the quarter, Spotify introduced a new video podcast offering for Premium Subscribers in the United States, United Kingdom, Australia and Canada, allowing people to watch podcasts uninterrupted by ads. The company also launched a new monetisation program for creators, called Spotify Partner Program, that enables creators to earn more money from their audio and video content.
In addition, Spotify debuted a new platform called Spotify for Authors, targeted towards authors and publishers who want to manage and grow their audiobooks on the service.
2025, a year of accelerated execution
Ek called 2025 the 'year of accelerated execution,' emphasizing that the company must move even faster to ship improvements and double down on music-related experiences while remaining 'disciplined with its resources.'
"The landscape is shifting constantly, and I want to set the pace - not play follow-the-leader. We're also going all in on our core and investing in more music experiences on the platform. Think video or the higher price premium tier that we have discussed previously, and new ways to bring fans and artists closer together...to push the historic expansion we're seeing in the music industry" he said.
In Q1 2025, Spotify expects to reach 265 million subscribers and 678 million monthly active users. Total revenue is expected to rise to €4.2 billion while operating income is expected to reach €548 million.
"I expect 2025 to deliver healthy growth alongside improved profitability. We're doing all of this while we continue to learn and optimise investing for the long term to benefit artists, creators and our users" Ek said.
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