Spotify topped guidance for total monthly listeners in the first quarter of 2022, despite the loss of 1.5 million paid subscribers in Russia and a roiling controversy over Joe Rogan’s podcast that had elicited calls for a boycott.
The audio streamer’s monthly average user base grew 19% in Q1, to 422 million, representing a net gain of 16 million in the period. Spotify exceeded expectations on MAU growth even excluding a “one-time benefit” of 3 million users who had created new accounts to access the service after an outage in early March.
Spotify netted 2 million Premium subscribers, to reach 182 million (up 15% year over year). That included approximately 1.5 million disconnects from the company’s ceasing Russian operations. Excluding the “involuntary churn” of Russian subs, growth was above expectations and subscriber gains outperformed in Latin America and Europe, according to the company.
“Our business exhibited strength and resiliency in Q1,” Spotify said in announcing the results. “Nearly all of our key metrics surpassed guidance, led by MAU outperformance, healthy revenue growth, and better gross margin.”
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Shares of Spotify climbed 4% in pre-market trading Wednesday on the results. The stock is down 55% year-to-date.
During March’s service outage, which caused users to be “involuntarily logged out of Spotify,” the company estimates certain affected users created new accounts to log back in, resulting in approximately 3 million additional MAUs in the quarter. One month later, Spotify saw a “reversal” of the 3 million MAU lift. Growth in monthly active users growth was “particularly strong in our Gen Z audience,” which Spotify attributed to new product features such as the expansion of lyrics across apps, as well as marketing and content initiatives.
Spotify reported revenue of €2.66 billion, up 24%, which was in line with expectations. Ad-supported revenue grew 31% year over year to €282 million. Spotify posted net income of €131 million, translating into earnings per share of €0.21 per diluted share.
On average, Wall Street analysts expected revenue of $2.81 billion (€2.65 billion) and EPS of -26 cents (-€0.25, according to Refinitiv data.
At the end of Q1, Spotify had 4.0 million podcasts on the platform (up from 3.6 million at the end of Q4). Podcast consumption rates grew in the double digits in the period, and “podcast share of overall consumption hours on our platform reached another all-time high,” the company said, without providing numbers.
Spotify had previously said it expected to lose about 1.5 million paying subscribers in Q1, citing the suspension of premium service in Russia in light of the war on Ukraine.
Prior to Russia’s invasion of Ukraine, CFO Paul Vogel said at an investor conference, Spotify was trending ahead of its Q1 guidance of adding a net 8 million total users, including 3 million paying customers — which suggested Spotify was not seeing a significant loss of users because of the backlash over Joe Rogan, the controversial podcast host whose show is exclusively carried on Spotify.
Rogan, who has $200 million-plus exclusive deal with the company, was the target of a boycott over accusations that he spread COVID misinformation on “The Joe Rogan Experience” show and the revelation that he used the N-word dozens of times in past episodes (leading Spotify to remove 70 “JRE” episodes).
Rogan claimed he actually picked up 2 million new listeners during the heat of the controversy. His show has reached an average of about 11 million listeners per episode, according to recent industry estimates.
For the second quarter of 2022, Spotify projects reaching total MAUs of 428 million (implying a net gain of 14 million, accounting for the loss of Russia listeners and the exclusion of the 3 million MAUs gained during the March outage). It expects 187 million Premium subscribers for Q2, which assumed an additional 600,000 disconnects from the full closure of Russian operations in April; excluding Russia, the Q2 guidance implies the addition of approximately 6 million net new subscribers in Q2.