According to CNBC, Spotify just reported third-quarter results that beat Wall Street expectations with total revenue climbing 12% year over year. The streaming platform grew premium subscribers by 12% to 281 million, though that came in slightly below expectations of 281.24 million. The company had hiked subscription prices in August from 10.99 euros to 11.99 euros across multiple markets including Europe, Asia-Pacific, and Latin America. Premium revenue grew 9% while ad-supported revenue dropped 6% to 446 million euros, missing StreetAccount’s expectation of 467.7 million euros. Despite the mixed results, shares only fell 2% on Tuesday, and CEO Daniel Ek announced he’ll step down in January to become executive chairman, with co-presidents Gustav Söderström and Alex Norström taking over.
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The Ad Problem Nobody’s Talking About
Here’s the thing that really stands out: Spotify‘s ad business is struggling. A 6% drop in ad revenue when you’re growing users? That’s concerning. Basically, they’re adding more ears but making less money from advertising them. This suggests either advertisers are pulling back or Spotify’s ad products just aren’t compelling enough. And with premium price increases already in play, they’re running out of easy levers to pull for revenue growth.
The Leadership Shift That Changes Everything
Daniel Ek stepping down as CEO in January is huge. He’s been the face of Spotify since the beginning. Now he’s handing the reins to his longtime co-presidents. But here’s my question: is this really a smooth transition or a sign that Ek wants to step back from day-to-day challenges? The timing feels interesting – right after price hikes and during an ad revenue slump. Maybe he sees tougher times ahead and wants to position himself differently. Or perhaps he genuinely believes the company needs fresh operational leadership while he focuses on bigger picture strategy.
What Comes Next for Spotify?
Looking at their guidance, Spotify seems cautious about the current quarter. They’re expecting weaker revenue and subscriber growth. That’s telling. After raising prices in so many markets, you’d think they’d be more optimistic. But the reality is they’re facing saturation in mature markets and intense competition everywhere. Apple Music, YouTube Music, Amazon Music – they’re all fighting for the same subscription dollars. And with ad revenue declining, Spotify’s two-engine growth strategy has basically become a single-engine plane. They need to figure out advertising fast, or those premium price increases will start feeling like the only tool in their toolbox.
