Spotify’s ability to attract new users, retain existing users, and convert users of its Ad-Supported Service to subscribers of its Premium Service depends in large part on its ability to continue to offer leading technologies and products, compelling content, superior functionality, and an engaging user experience.
However, the company has been facing stiff competition in the market. The tech titans including Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and Google (NASDAQ: GOOGL), are developing devices for which their music streaming service is preloaded. This puts Spotify at a significant competitive disadvantage.
In addition, Spotify is expected to enhance and improve its existing service by introducing new features along with additional technological advances and an adaptable platform as consumer demands keeps changing more frequently. The future results could be adversely impacted if it fails to keep pace with technological advances or offer compelling product offerings to meet consumer demands.
Analysts expect the company to report a loss of $0.35 per share on revenue of $1.84 billion for the second quarter. In comparison, during the previous year quarter, Spotify posted a loss of $2.52 per share on revenue of $1.46 billion.
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For the first quarter, the company reported better-than-expected revenues while earnings fell short of estimates. Monthly active users (MAUs) grew 26% year-over-year to 217 million. Average revenue per user (ARPU) was EUR4.71, roughly flat year-over-year.
For the second quarter, Spotify expects revenue to grow 18-35% year-over-year to EUR1.51 billion to EUR1.71 billion. Operating loss is expected to come in the range of EUR15-95 million. Total MAUs are expected to increase 23-27% year-over-year to 222-228 million while total premium subscribers are expected to grow 29-34% to 107-110 million.
The company is expected to address a number of challenges in order to increase its ad-supported users and its premium subscribers. This includes improving ad-supported service, providing high-quality and user-friendly experience, continuing to curate a catalog of content, and continuing to innovate and keep pace with changes in technology and competitors. It also includes maintaining and building relationships with the makers of consumer products such as mobile devices.