First the controversy surrounding the equally popular and controversial podcast star Joe Rogan, then the announcement of the around 300 million dollar sponsorship contract with FC Barcelona, ​​which also includes the naming rights to the legendary Camp Nou: the first quarter was made up of Spotify Anything but uneventful.

Benjamin Fisher

Editor in Business.

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Of course, the Ukraine war also hit the business of the music streaming market leader.

The service closed its Russia offices early on.

In addition, access to content from Russian state media was restricted and the offering of RT and Sputnik in the EU and “other markets” was removed.

The platform itself initially remained available.

In mid-March, however, the subscription offer was discontinued, and about two weeks later - with reference to possible consequences for employees and listeners due to the new Russian media legislation - as was the advertising-based free version.

Plus around 2 million subscribers

At the end of the first quarter of 2021, Spotify now had 182 million subscribers and 422 million monthly users - after 180 million and 406 million respectively at the end of last year.

According to Spotify, however, a one-off effect was important for monthly active users: After technical difficulties in March, some users had to create a new account, which on paper led to around three million additional monthly active users.

The withdrawal from Russia resulted in the loss of around 1.5 million subscribers.

CFO Paul Vogel had already anticipated this in mid-March and remarked at the time that without this effect one would move above expectations, which also implied that layoffs due to the Joe Rogan debate were apparently limited.

Leaving aside the Russia effect, the increase in subscribers has exceeded the forecast and the overall business development is very satisfactory, according to Spotify.

In Latin America and Europe in particular, growth exceeded expectations.

With an increase of three million (and 418 million active users), this forecast was also rather conservative and had caused disappointment among investors

– also because the service announced that it would no longer issue an annual forecast.

For the current quarter, Spotify expects an increase to 187 million subscribers.

Another 600,000 subscription losses due to the completion of the withdrawal from Russia are likely to have an impact here, as the Swedish company reports.

The stock was up almost 3 percent pre-market.

Sales increased by 24 percent year-on-year to EUR 2.6 billion.

Of this, the subscription business accounted for around 2.4 billion euros (plus 23 percent) and advertising revenue for 232 million euros.

The latter grew by 31 percent compared to the first quarter of last year.

With a view to the traditionally strong advertising Christmas business, however, there is again a minus compared to the fourth quarter of 2021 (28 percent).

This also results in a minus of one percent in total sales.

The bottom line was a profit of 131 million euros after 23 million euros in the previous year.

Podcasts in focus

Meanwhile, the average revenue per subscriber – a value that is also being monitored very closely in the music industry – increased by 6 percent compared to the previous year.

However, EUR 4.38 means a slight decrease compared to the EUR 4.40 in the fourth quarter of 2021. Spotify once again referred to the effect of price increases.

The standard price of the individual subscription, 9.99 euros or dollars, has not yet been adjusted by the market leader or by the biggest competitors from Apple and Amazon as well as YouTube in a large market.

Only the significantly smaller service Deezer now also charges 10.99 euros per month from new customers in Germany.

Basically, the streaming services all distribute around two-thirds of their total income to the various rights holders of the music.

The conservative pricing policy could benefit Spotify & Co in the short term given the ubiquitous cost increases and possible considerations by users to cancel services.

As a reason for the reluctance of the music services, their similarity is always given.

In contrast to Apple, Amazon, Deezer or Tidal, Spotify still does not offer hi-fi quality.

However, the music catalogs of the providers are almost the same.

It's also a reason behind Spotify's "audio first" strategy, which sees the service investing heavily in podcasts.

On the one hand through takeovers, on the other hand in the form of well-endowed exclusive deals with the most prominent hosts possible, such as Joe Rogan, who is said to have received up to 200 million dollars for the exclusive distribution of his show.

The service also has an exclusive contract with Barack and Michelle Obama, which is apparently due to expire, as Bloomberg recently reported.

Overall, Spotify counted four million podcasts at the end of the first quarter after 3.6 million in the last quarter of last year.

The greater use of podcasts should also make Spotify more independent of the music industry and at the same time more attractive for advertising customers.

Because podcast advertising is also recorded by subscribers and not just the users of the free version, which is given in functions where advertising also interrupts music consumption.