Competing with the likes of Amazon and Apple is no small ask either. If Spotify can't deliver the required growth, the virtuous circle of higher revenues, lower average costs and improved cash flow will break. The path to profits isn't without pitfalls though. It allows it to pounce on opportunity - like the recent Megaphone deal to help boost its reach in the mushrooming podcast industry. That means there's no need to rely on investors for new cash, giving it flexibility. Unlike some rival streaming services Spotify is self-sufficient from a cash perspective. The company is working to provide a route to market for individual artists too, developing tools to help them thrive. More listeners improve Spotify's bargaining power with major record labels too. More subscribers help lower operating costs as a percentage of revenue, which ultimately moves the company into profit. Looking beyond the disruption the business should be very scalable, ultimately helping it to exit loss-making territory. Some of that's being supported by less-lucrative promotions, but on balance this is still a very positive step in the right direction.
Monthly Active Users (MAUs) are still growing - faster than expected we might add- feeding the top of the revenue funnel.
A decent proportion of these users then ultimately become premium, or paying, users, boosting revenue and margins in the process.
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Spotify's model depends on people signing up to its service, whether that's through a free trial, or the free-to-use ad supported service. Coronavirus hasn't disrupted the stream of new listeners, so we think the long-term attractions remain in play. Subscriber numbers are the most important metric to watch at Spotify.
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View the latest Spotify share price and how to deal Our view The shares fell 5.8% in pre-market trading. This reflected higher than planned operating expenses, relating to payroll taxes linked to the group's share price performance. Spotify reported an operating loss of €69m. The number of premium subscribers (who pay to use the ad-free version of the service) rose 24% to 155m, which exceeded management's expectations. This was at the top end of management's guidance range. Spotify's fourth quarter revenue rose 17% to €2.2bn, with monthly active users rising 27% to 345m. Market closed | Prices delayed by at least 15 minutes | Switch to live prices
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