Spotify premium subscribers grew 24% and total revenue of €2,168 million grew 17%

We ended 2020 with strong Q4 performance as the business delivered substantial MAU growth, subscriber additions that exceeded our guidance, an improvement in ARPU trends, acceleration of users who engage with podcast content, better than expected Gross Margin, and Free Cash Flow of €74 million. Headwinds included the negative effects from FX movements, which were more severe than forecast and impacted revenue growth by 690 bps. Given the strong Q4 performance, we believe we are well positioned for continued growth in 2021.

PREMIUM SUBSCRIBERS

Our Premium Subscribers grew 24% Y/Y to 155 million in the quarter, exceeding the top end of our guidance range. For the full year, net additions accelerated to a record 30 million compared to 2019 net additions of 28 million. In Q4, we added 10 million subscribers, with all regions contributing to growth, led by Europe and North America. Europe continues to benefit from our July launch in Russia and 12 surrounding markets. Relative to our forecast, Latin America and Europe performed particularly well from a regional perspective, while Family Plan and Duo additions were strong from a product perspective.

Of note this quarter was the launch of Spotify Premium Mini in India and Indonesia, which gives users daily and weekly access to a subset of their favorite Premium features for a lower price as part of Spotify’s commitment to continuously explore new ways to improve our Premium experience. In Q4, we also announced partnership deals with Grab (Southeast Asia), Flipkart (India), Tink (Germany), and Euronics (Europe). On February 1, we announced that Spotify is now officially available in South Korea, the world’s 6th largest music market.

Our average monthly Premium churn rate for the quarter was down slightly Y/Y and up modestly Q/Q. This was in line with expectations with the sequential increase due to churn from promotional plans. We expect churn to continue to decline in 2021.

Revenue

Total revenue of €2,168 million grew 17% Y/Y in Q4 or 24% Y/Y on a constant currency basis. Reported revenue was slightly above the midpoint of our guidance range, as FX headwinds of 690 bps were higher than the 600 bps incorporated into our plan. Excluding these headwinds we were slightly above plan. The depreciation of the US Dollar vs. the Euro was the primary driver of this variance. Premium revenue grew 15% Y/Y to €1,887 million (or 22% Y/Y in constant currency terms) while Ad-Supported revenue was particularly strong, growing 29% Y/Y (or 39% Y/Y in constant currency terms).

Within Premium, average revenue per user (“ARPU”) of €4.26 in Q4 was down 8% Y/Y (but down only 3% Y/Y in constant currency terms vs. down 6% Y/Y in Q3). Excluding FX, product mix accounted for the majority of the ARPU decline, followed by geographic mix, but was partially offset by reduced promotional activity. In October, we raised the price of the Family Plan in 7 markets (Australia, Belgium, Switzerland, Bolivia, Peru, Ecuador, and Colombia) alongside Duo in Colombia. Early results of the price increases have been highly encouraging, as we have seen no meaningful impacts to churn or customer intake in these markets. On February 1, we announced Family Plan price increases across an additional 25 markets (8 in Latin America, 12 in Europe, 4 in Rest of World and Canada in North America), including full portfolio price increases in Sweden, Norway, Finland, and Iceland. We expect continued sequential improvement in the Y/Y change in Premium ARPU in 2021 on a constant currency basis.