Spotify has 188 million Premium users, but continues to lose money

Spotify’s second-quarter financial release shows that the streaming giant has yet to feel the brunt of the looming global recession. Unlike Netflix, which reported a decline in its overall subscriber base, Spotify has seen both free and paid accounts grow. It now has 433 million users, up from the 422 million reported at the end of the first quarter. 188 million of those are paying for Premium, a jump of 6 million from three months ago, while another 4 million are ad-supported.

Despite industry-wide fears that household budgets would slash entertainment costs to free up much-needed cash, Spotify has so far dodged cost-cutting. The company said that while it is keeping an eye on the “uncertain” environment, it was “pleased with the resilience of [its] Business.” However, the company spent heavily to grow its user base, with marketing campaigns aimed at luring back users who were looking to lapse their subscriptions or upgrade to a family plan.

That marketing spend helped blow a hole in the company’s finances, with Spotify posting a €194 million ($197 million) quarterly loss. The company is banking on strong increases in revenue from both subscriptions and advertising to offset those losses. Additionally, the plan to focus on cheaper forms of audio content, like podcasts and audiobooks, should mean that the amount of cash it pays to record labels will drop to more tolerable (for Spotify) levels — even if the recording artists do continue to demonstrate are being denied revenue by the flat royalties paid per stream.

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