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Will The Spotify Boom Cool Off Post Pandemic?

Possibly a sign that the lockdown entertainment boom has come and now gone, Spotify is expected to report this week a significant slowdown in the number of new subscribers in the first quarter.

It’s not alone – another streaming app to have enjoyed a spike in business mid-pandemic, only to experience the cool-down that followed, is Netflix. The entertainment giant reported a shaky first three months of 2021 where new sign-ups are concerned, marking an end to its record run of growth during the pandemic. This is the very same trend expected for Spotify’s numbers.

When the audio streaming company updates investors on Wednesday, it’s not expected to have maintained the incredible rate of new subscriber growth from last year.

Spotify reported 6 million new subscribers in the first three months of 2020 and 11 million in the quarter to December’s end. However, it’s been sure to warn investors against expecting the boom to continue at such a pace.

In total, Spotify added 31 million new paying subscribers last year, clearly thanks to the coronavirus lockdown causing a boom in people listening to music and podcasts to escape the boredom.

That boom sent the number of paying customers soaring to 155 million, and Spotify’s total monthly user base – including those on its free, advertising-supported tier – climbed to 345 million.

But the drastic change in numbers was just that – a boom – and in February this year, Spotify forecast adding 29 million new paying subscribers this year at best, and at worst it expected 17 million, almost half the total last year.

Not exactly a shock, considering the numbers spike was pandemic-induced and based on wildly changing consumer behaviours. All the same, investors panicked and sold shares, sending Spotify’s shares down 8 per cent despite the company beating Wall Street expectations on the growth rate of subscriber numbers and advertising for last year.

Swedish company Spotify has forecast an operating loss of €200 million to €300 million this year (that’s roughly AU$310–470 billion), compared with an operating loss of €293 million (around AU$457 million) in 2020.

Despite the expected cooling of growth, Spotify continues to experience a significant pandemic bump. The company’s share price has doubled over the past year, giving it a market valuation of more than US$50 billion (about AU$64.3 billion).

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