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The State of Spotify Streaming

The Swedish streaming service released Q3 numbers this week featuring both ups and downs. But with the returns of Taylor Swift and Rihanna, is Spotify headed back into the black?

Taylor‘s takeover. Rihanna‘s return. This is more than just alliteration, people — streaming services posted an elite week driven by two of the biggest stars in the game.

Spotify revealed its Q3 earnings report and the results are mixed. TL;DR: Users are up; profits are down. However, with a strong Q4 on the horizon, Spotify CEO Daniel Ek remains more confident than ever that his company can head into 2023 in the black.

Boardroom breaks down the report and what may lie ahead for the company in its fourth quarter.

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Spotify Q3: A Tale of Two Parts

Spotify released its third-quarter earnings report this week. The numbers show that the Swedish streaming platform set a new threshold for users with 456 million, posting stronger-than-expected additions to both its free and paid user base. The premium paid user ship increased by seven million users in Q3, outpacing expectations by 14% and posting a 13% year-over-year improvement.

Despite the surge in streams, their financials are a mixed bag. Spotify signaled a 22% increase in revenue driven by its premium packages, but the net positive was hampered by questions about the company’s gross figures. Overall, the company’s stock experienced a 16% dig as compared to projections, fueling an additional after-hours hit following the report’s release.

However, Daniel Ek appeared unphased by the news and expressed his hopes for a substantial final quarter. As the CEO told shareholders:

“With one quarter left in a year that has seen war, a lingering pandemic, inflation, supply chain disruption, and threats of a global recession, I am really proud of all that we have accomplished and that despite all of this, we are precisely where we thought we’d be.”

As its competitors like YouTube and Apple Music roll out price hikes, the company is said to be actively considering the same. Ek alluded to this in his recent comments, saying, “When our competitors are raising their prices, that is really good for us.” However, he left the finer implications up to our imaginations.

Spotify Wrapped: Looking Forward

Ek has a right to be optimistic. Spotify is already seeing historic numbers in Q4, due in part to Midnights, the latest LP from Taylor Swift. According to Spotify charts data, T Swift took over the top spots on the most-streamed artist, album, and songs list for the week of Oct. 21-27.

All told, Midnights shattered three existing streaming records in its first week:

  • Most streams in 24 hours: 184.6 million
  • Most Day 1 streams of an album: 184.6 million
  • Most streamed artist in 24 hours: 228 million

Plus, Oct. 28 marked the official launch of Rihanna’s return. The Barbadian billionaire put an end to her six-year solo hiatus, releasing the lead track from the upcoming Black Panther: Wakanda Forever soundtrack. The Navy is expected to dominate the charts in the coming week as Rihanna’s Super Bowl LVIII halftime appearance draws nearer.

In the big picture, however, Spotify’s grandest potential lies in its global reach. On the upside of the Q3 news, the company saw a surge in new sign-ups from Latin American countries. The trend is no surprise due to the sheer dominance of Spanish-singing artists on the 2022 charts, led by the meteoric success of Bad Bunny’s Un Verano Sin Tí but fueled by other big names such as Rosalía, and Daddy Yankee. Not only is the streaming welcoming its new subscribers with open arms, but Spotify is also enhancing its investment in the industry with an investment in talent and executive programs, including MUdaL, and curated content and experiences, such as its new Casa Spotify Medallo in Medellín, Colombia.

With Spotify Wrapped season just around the corner, the company has a ton of opportunities to reset its financial future. The good news? They’ve got a whole slew of big names to balance the budget. But with an expanding field of competition that includes the pitter-patter of TikTok’s footsteps as the platform considers its own music streaming service, can the company stay in the lead?

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